Marine loan rates are at an all time low, find out why financing your boat may be favorable even if you have the cash. Philip Bartholomew from Seacoast Marine Finance has a fresh new perspective from the inside. If you are looking to buy a boat in the next quarter you should
Market activity is slowly increasing over 2009-2010 levels. Marine lenders are consistently lending money and aggressively seeking qualified applicants. Our clients continue to benefit from the current buyers’ market and are purchasing quality vessels at prices unthinkable at this time last year, or the year before, or the year before. I am continually amazed at the sale prices coming across my desk.
In the past year, I have also seen experienced boat owners, many of whom were cash buyers of their previous boats, use marine financing not only as a business tool, but as a hedge. To them, the recent economic times have highlighted the benefit of minimizing their initial cash outlay and retaining much of the capital that would have otherwise been spent on the cash purchase of a vessel.
In most finance transactions, 20% to 25% of a vessel’s purchase price is paid upfront and the remainder is financed. (FYI, the lowest fixed interest rates are reserved for those who choose to put down 35% or higher). Other personal or business assets or credit lines are not encumbered because mortgages are secured solely by the vessel.
As of today, February 1, 2011, marine interest rates are the lowest they’ve been since 2004. Loans greater than $100,000 are in the 4% to 5% range. Typical loan term and amortization is 20 years. Depending on the loan size and the borrower’s planned length of vessel ownership, multiple loan options permit varying levels of customization and flexibility.
For the most part, loan underwriting is based on the applicant’s personal cash flow, liquidity and credit history. Presentation of pay statements, Federal income tax returns and bank account balances are standard requests. Business owners and self-employed applicants are expected to show business returns and financial statements as well.
For the well-advised and -prepared yacht buyer, today’s opportunities are remarkable. Prices are low and money is relatively cheap. Despite the prevailing market conditions, the fundamentals of a yacht purchase remain the same: find the right boat, negotiate an acceptable price, and use the tools available to structure the purchase to one’s best advantage.
Feel free to post your questions below, and for the benefit of everyone we will keep the conversation open for everyone…