The Ins and Outs of Yacht Financing
If you’re ready to pursue your yacht ownership goals, yacht financing is a great way to get the ball rolling so you can start enjoying life on the water. Contrary to what many consumers believe, financing a yacht can actually save you more money instead of dipping into savings or liquidating assets and paying cash. According to marine finance expert Jeff Johnson, Regional Sales Manager at HMY, the advantages of financing, compared to a cash purchase, can be dramatic. “By financing your yacht” says Jeff, “you retain economic flexibility. It basically comes down to the opportunity cost of your money and can you make more with your capital at work than the loan will cost?” The financing process doesn’t have to be a hassle and it can be simplified if you work with the right marine lender.
When choosing a financer be sure to go with an experienced marine lender. A Marine lender understands the process as well as the product. For example, you wouldn’t call a home lender to finance a yacht or call a marine lender to finance a home. Marine financing lenders are known to offer very competitive terms and fast credit decisions since boat loans are the core of their business – a huge advantage of selecting this option. Most marine lenders will even allow taxes and marine accessories to be included in the loan amount. Some yachts may qualify for the same IRS tax advantages that are available for homes, like deductible mortgage interest. A boat can actually qualify as a “second home” in certain cases if it has a berth, head and galley which could result in a tax deduction. Consult with your tax advisor to see if your boat qualifies.
A menu of different types of loans are available to and your individual financial situation. Long Term Fixed Rates (15 - 20 years, simple interest loan), Short Term Fixed Rates (20-year term, rate is fixed for the first 3 years then becomes adjustable), Monthly Adjustable Rates (20-year term, rate is variable @ a spread over the 30 Day LIBOR Rate), or Interest Only Loan (Interest rate is fixed for the full term of the loan (20 years). With the latter option payments are interest only for the first 3 years, followed by fully amortizing payments of principal and interest for the remaining term. Before buying any new or pre-owned yacht, begin with an evaluation of your financial situation. When figuring out how much boat you can afford, be sure to factor in important elements like the down payment, monthly loan payments, yacht storage or dockage costs, upkeep and repairs, insurance, gas, etc…
Talk to experienced professional marine lenders and compare offers. Once you choose one, apply to that one and let them go to work for you. Steer clear of applying to multiple marine lenders as that can confuse the issue. Multiple inquiries and duplicate applications are not positive for your credit and are not what the banks want to see. When it comes time to execute the finance application and negotiation, gather all necessary documentation for the loan process such as your personal financial statement, credit report and tax returns. A great tip to improve your purchasing power is to have a pre-approval letter from your lender before you go to the dealership to buy your yacht. It shows you’re a serious buyer and gives you leverage that will speed things up and ultimately benefit you in the purchasing process.
Federal and state lending laws regulate consumer financing. Familiarize yourself with these laws by visiting www.ftc.gov and www.naag.org.
If you have any questions regarding yacht financing feel free to contact Jeff Johnson, HMY Regional Sales Manager at 954-465-8980.
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