Getting Your Boat Financed
A VanDutch 40 purchased at $500,000 with 20% down ($100,000), can have its $400,000 loan paid back between a 5-20 year period.
What is Marine Financing and how does it work?
Marine Financing is very similar to the home lending process. Should you qualify, a lender will collateralize your yacht as security and lend a lump sum towards the purchase.
With a 20% down payment, you can receive rates competitive with home lending and term lengths up to 20 years on purchases of $5,000,000 or less. Looking to put less down? Its possible, yet you’ll be exposed to a harder approval process and, likely, a higher rate.
Similar to home lending, banks will require a certified professional to inspect the vessel - likely from the SAMS or NAMS database - who will identify defects and suggest remedies to justify the boat’s appraised value. Considering marine inspections can yield a wider (and more costly) set of notable defects than a home inspection, the qualifications of a SAMS or NAMS surveyor helps the lender know the information is trustworthy. Surveyors have busy schedules, so engage a trusted specialist as soon as you can. A delayed survey can domino every aspect of your closing calendar.
After your survey and findings yield an Acceptance, your lender will compile your loan documents for final signatures. You’ll sign the closing package, or opt to receive the package in the mail and sign remotely. Once your documents are signed, you’ll receive the “Clear to Close” designation and ownership of your vessel soon after.
Common Questions
-
For many, cash translates into opportunity. By retaining your cash verses committing it wholly to your yacht, you can save the money, expand your business, invest in property, or simply find something that yields a better return.
-
No. Your financials are secure and the lender never discloses any personal information to outside parties during the approval or closing process.
-
Just as in home buying, a pre-approval will always give you more leverage in a negotiation. It will also give you a guide for how much you can offer. We always advise on a pre-approval so clients can set their expectations before falling in love with something outside of the budget.
-
Sometimes you can, if the purchase is classified as a second home or depreciation. This question is best addressed with your tax advisor. We can introduce you to specialists if you’d like to speak to someone for guidance on the matter.
-
Sometimes banks will take steps to restrict your boat’s operable area to minimize risk of damage or loss. With financing, you’ll be required to federally register your boat with the United States Coast Guard, alerting banks to your movements outside of the United States.
-
No. Your lender will require the surveyor be hired by you, paid by you, and the survey be done as recently as possible.
-
Yes, but you will likely need to front the entire purchase price until the boat lands in the United States. Once your lender has confirmation the boat is on US soil, they will release your loan amount (Purchase price minus deposit) back to you.
-
Yes. While your company will own the asset, your personal self would be used as a co-signer on the loan.
What to Prepare
Your application will require a personal financial statement (all assets and liabilities, including cash amounts), tax returns from the last 3-5 years and a personal questionnaire. You may be required to release corporate statements and tax returns if you plan to purchase the boat in a company or if your personal statements don’t show enough assets to garner an approval.
With the right documents and a veteran lending agent, you can receive approval within 24-48 hours from the submission of your complete application.
WHAT RED FLAGS DO LENDERS LOOK FOR?
As with all lending, you’re applying for someone to grant you access to a large amount of money in trade for proof you will pay it back, plus interest. Banks will look for any risky variables not worth the gamble. US lenders look for stability and longevity in the United States, and expect your assets and cash flows to be close by.
Here are some red flags to keep in mind while completing your loan application:
No US passport
Debt to income ratio higher than 40% pre-purchase
Claiming the assets of a family member, child or spouse
Claiming non-liquid assets as cash
No United States cashflow (non-liquid wealth outside the US doesn’t really help)
Prior boating accidents or full loss insurance claims
If you’re in the buying process and think a marine loan can help achieve your purchasing goals, we are happy to review your strategy and introduce you to the lender who best suits your needs. General question? Drop a comment below.
Get Approved
Contact us by completing a simple form and our team will contact you to learn more about your desired purchase and introduce you to the best lender for your needs.
About the Author
Reed Nicol is a licensed yacht broker with a wealth of industry knowledge. He’s worked as an executive and sales director in yacht manufacturing and distribution, now as a private broker helping his clients buy and sell great boats. Read more about Reed’s marine journey, his love of helping 1st time boaters and his entrepreneurial spirit here.
Reed Nicol [Licensed FL Yacht Broker #11926]
(201) 264-6356
Reed.Nicol@WaveYachtSales.com
