Financing ?

I agree that if you have a hard time financing the boat, get an equity loan on your home if you can. The interest rate will likely be lower and much less of a hassle to get than a boat loan.

Just because one finances a boat doesn't necessarily mean that that person doesn't have the funds to pay for the boat in full. Sometimes our investments are earning a higher interest rate than the going loan rates, which makes it unwise to use such money if you can borrow for cheap. Also when you are under a certain age (62?), tapping into your money that is in some type of retirement savings like IRA will cost you a 10% withdrawal penalty. Yet another reason to borrow.

mahal said:

I agree that if you have a hard time financing the boat, get an equity loan on your home if you can. The interest rate will likely be lower and much less of a hassle to get than a boat loan.

Just because one finances a boat doesn't necessarily mean that that person doesn't have the funds to pay for the boat in full. Sometimes our investments are earning a higher interest rate than the going loan rates, which makes it unwise to use such money if you can borrow for cheap. Also when you are under a certain age (62?), tapping into your money that is in some type of retirement savings like IRA will cost you a 10% withdrawal penalty. Yet another reason to borrow.

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Personally, I believe that if kept within reason, there is nothing wrong with financing some portion of a boat purchase. What is "within reason" differs from person to person. I am not a tax expert though, and I would get some professional advice regarding whether interest on a home equity loan is deductible. It may be; but I would sure ask.

CPseudonym said:

I feel bad for starting this crap storm gang, that was not my intention. There's nothing wrong with how you conduct your business affairs I merely stated a personal preference for how I conduct mine. Lesson learned from going 2 years with zero revenue many years ago. Best thing that ever happened to me though in hindsight.

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Nothing to feel bad about. Anytime there's a question that can't be answered with a definitive YES or NO, there's going to be debate.
In the end, you actually may have helped a fellow member (see below):

Daddyo said:

Call me or email me. I have the guy for you.

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Happy Thanksgiving everyone!

OD

I for one have no problem with financing a boat, and no problem saying my boat has a mortgage.

The simple fact is that my boat is the largest purchase my admrial and I have ever made, including our lakefront home.

If I were to save up non tax deferred cash I honestly would have never been able to buy a boat of this magnitude.

Yes we could have mortgaged our home, or we could have raided our 401ks but those would have been poor decisions in the long term.

Having a reasonable down payment and then sinking approx our boats purchase price into a total refit (cash for this) left us in a position where I have exactly the boat I wanted. If we want to we can cruise safely and comfortably anywhere along any coast in the Americas.

Seven years from now I'll be 58, able to draw my pensions, so I'll retire, and have a beautiful paid for yacht in the harbor. yes, we actually have a plan. This purchase at exactly the stage of life we were at, was planned precisely based on my retirement date.

AusCan said:

To continue the slight thread drift....

I''ve got old school ideas on this, and don't finance boats, cars or anything that goes down in value.

Also - I had some wise advice when deciding on my latest boat.
"Don't spend more than 10% of your overall worth (house, share investments, savings etc) on any boat."

There are times that I wish I'd ignored the above and bought a Nordy, but not often.

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And just when as you know it will be your last day boating?

If you do finance remember that the interest is deductible from US income taxes as a second home. If you do not have a primary home it is not likely that you will be able to finance a boat anyway.

yachtbrokerguy said:

If you do finance remember that the interest is deductible from US income taxes as a second home. If you do not have a primary home it is not likely that you will be able to finance a boat anyway.

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That's a sweet deal. Here in Canada we don't get dem der breaks.

Find a boat you can afford to pay cash for. Maybe a smaller one does the trick of a larger one? For example a Doral 25'SE has more cockpit seating than a Sea Ray 40', AND has the same sized berth. Many boat designs are just wasted space due to poor design.

yachtbrokerguy said:

If you do finance remember that the interest is deductible from US income taxes as a second home. If you do not have a primary home it is not likely that you will be able to finance a boat anyway.

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Huh? Never heard of this- I'm a full time liveaboard here in Seattle, and we financed our boat. I insure hundreds of liveaboards and thousands of renters that financed their boats- boats from 11' to 80+' feet.

Do you have any basis for your opinion?

I wrote off loan interest for years and still deduct property taxes. Here's the law:

Publication 936 (2013), Home Mortgage Interest Deduction

Qualified Home

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.

Deduction Allowed in Year Paid

You can fully deduct points in the year paid if you meet all the following tests. (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid.)

Your loan is secured by your main home. (Your main home is the one you ordinarily live in most of the time.)

Paying points is an established business practice in the area where the loan was made.

The points paid were not more than the points generally charged in that area.

You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them. Most individuals use this method.

The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.

The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. The funds you provided are not required to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. You cannot have borrowed these funds from your lender or mortgage broker.

You use your loan to buy or build your main home.

The points were computed as a percentage of the principal amount of the mortgage.

The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. The points may be shown as paid from either your funds or the seller's.

Note.

If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan.

Pau Hana said:

Huh? Never heard of this- I'm a full time liveaboard here in Seattle, and we financed our boat. I insure hundreds of liveaboards and thousands of renters that financed their boats- boats from 11' to 80+' feet.

Do you have any basis for your opinion?

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In all my years (since 1978) as a broker I have never seen a lender finance a boat to anybody who didn't own a home before they bought a boat- UNLESS they purchased CD's from the bank in the amounts way more than they lent. At which point the borrower said "so your going to pay me 4% on my money, but charge me 9% to borrow against it?", at which point they said "screw that I'll just pay cash", and did. Even back when they were giving money away like drunken sailors, the lenders wanted to see a land address with equity. They want some way to find you and not have their asset sail across the International borders with no recourse.