Financing your first boat

armchairsailor

armchairsailor

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Since we seem to be doing a few threads on advice for newbies, can anyone give a broad run-down of marine mortgages and other avenues of finance please?

Clearly there are many specific questions that can only be answered by going to the lenders, but as I see it, there are three main options - extend your home mortgage, take out a marine loan/ mortgage or take out a standard loan. There are doubtless pros and cons to all these routes, but it would be good to see peoples' experiences and thoughts.

Questions I would like to see answered are:
- What percentage of the boats value could one typically expect to borrow?
- Have people found lower limits to marine mortgages, and if so what options are there for buyers of cheaper vessels?
- Do the lenders treat buy-to-charter differently from folk just getting a boat for their own use?
- If you buy to charter, is it best to have a business plan if you're doing it yourself, or indeed giving it over to a management company?
- What's a typical borrowing period - 7 years, 10 years?

I'm sure there's more, but there's a starter for 10.
 
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Here's another idea, save up your money then hunt for a second hand yacht of under 26 ft.
There are thousands of them out there for sale, its a buyers market with a lot of bargains around. Be prepared to make offers & walk away if its too expensive.
If you buy a cheap small boat as a beginner you havent lost much if you or your other half decides you dont like it after all!
 
Keith 66 said:
Here's another idea, save up your money then hunt for a second hand yacht of under 26 ft.
There are thousands of them out there for sale, its a buyers market with a lot of bargains around. Be prepared to make offers & walk away if its too expensive.
If you buy a cheap small boat as a beginner you havent lost much if you or your other half decides you dont like it after all!
Click to expand...

i have always used "Easy Terms" just the one cheque for the full amount, it isnt sensible to fund a leisure activity by borrowed money imho.
Im off now, stage left:p
 
Could you give some indication of likely spend and required size?

It may make a very significant difference.
 
An alternative source of finance is Zopa, which is becoming very popular. You say how much you want to borrow and at what rate and Zopa try and match you up with what personal lenders are prepared to lend at.
Borrowers are credit scored, high risk borrowers pay higher rates.
Lenders spread their risk by choosing what term and credit score they will lend to and at what rate. They also spead risk by only offering a small amount, typically £10 to each borrower, so any loan from Zopa is likely to be composed of £10 chunks from many lenders.
It sounds odd, but it works and is very successful for both borrowers who can get a better rate than that offered by banks and other sources and for lenders who can get a better rate of interest than that available in the market today even after bad debts and charges.
Zopa take a small cut of each transaction.
See www.zopa.com
 
armchairsailor said:
- If you buy to charter, is it best to have a business plan if you're doing it yourself, or indeed giving it over to a management company?
Click to expand...

It certainly is. I did one and it brought it home that there's rarely a business case for buying a boat to charter.

By all means look at chartering to subsidise the cost of running a boat you are set on buying anyway, but don't believe you'll make a profit.

However I'd vote for buying a boat only from money you already have. Paying for a loan on top of the substantial running costs of a boat just wouldn't appeal to me. There'll always be something you can afford if you lower your sights.
 
To answer your specific questions.

Marine mortgages usually advance up to say 60 or 70%. Normally they have lower limits of £15-20k.

Interest rates on these are usually pegged to a base rate and repayments fixed so terms vary as rates vary.

Unsecured loans might be appropriate with low value purchase, but rates are usuallly high and terms short.

If you are going to borrow and want to keep annual costs down, an interst only mortgage secured against your house is the "best". However you need to repay at some point, so not suitable if the boat is likely to lose capital value significantly (depending of course on what proportion of cost you borrowed).

Purchasing with a view to charter is fraught with problems unless you are in an organised scheme - where depending on what you are looking for it is possible to get good value. Buying your own boat and trying to recover costs by chartering is not easy for all sorts of reasons that are too long to go into here.

All these barriers in recessionary times is the main reason why new boat sales have collapsed. 5 years ago when it looked like the world was going to grow forever it was a different story!
 
FullCircle said:
Could you give some indication of likely spend and required size?

It may make a very significant difference.
Click to expand...

My question is much more general - I'm not in the market to buy (wish I was...): it's more about what people can offer in terms of advice or experiences regarding how to finance a boat.

Certainly saving up is the most sensible option, but who TF has the cash to cough up for an Oceanis 50 or something like that? How on earth do they go about paying for one of those monsters?
 
armchairsailor said:
My question is much more general - I'm not in the market to buy (wish I was...): it's more about what people can offer in terms of advice or experiences regarding how to finance a boat.

Certainly saving up is the most sensible option, but who TF has the cash to cough up for an Oceanis 50 or something like that? How on earth do they go about paying for one of those monsters?
Click to expand...

[Certainly saving up is the most sensible option, but who TF has the cash to cough up for an Oceanis 50 or something like that? How on earth do they go about paying for one of those monsters?]

Try an Oyster 85 @ the above x 4
 
Just save up, and use that time doing your research and dreaming

Saving is cheaper than borrowing

As someone up there ^^^^^ said, there are loads of 2nd hand boats out there

Yes we could have borrowed, and got a bigger boat, but there's only two of us and we maxed our budget getting the Sadler with no depts. We can then spend the money we would have be paying on repayments, keeping her in a marina, updating the boat and improving her to our needs etc
 
working me t*ts off on a low income to try and be ready for the spring or even before:D.
I have bought some good stuff on here at a reasonable price.

But must admit I made sure I cut my cloth accordingly, but still run out of money each month :eek:
Derrick
 
My first cruiser was a Vivacity 20, bought for about £1,200, sold a couple of years later at a profit. Then a Macwester 26, bought with a re-mprtgage for £4,750, used for weekends (well, midweek equivilents) and a fortnights cruis a year. Sold after 6 years for what I paid. Neither boat owed me a penny considering the fun they'd given. Then down-sized house to finance the current boat, which will probably sell for pretty much what we paid.

What I'm trying to say is, if a boat will sell for what you pay for her and you use her then when you sel,l you offset what you haven't spent on holidays and weekends away against running costs and see that it's paid for itself.

At least, that's what I keep telling myself.

As for 'You can afford cash for a new boat', either those who get a windfall or the very rich.
 
would never consider a boat a financial investment and therefore could never justify borrowing to buy one.

started my boat fund back in 2002. putting by what I could, when I could.
6 years later bought my boat. Spent the years in between crewing & learning, deciding what I wanted, and determining how much I was willing to pay.

All I have to do now is kick the tobacco habit to pay for the maintenance.

who was it said "you can have anything in life, but you can't have everything"!?

Is boat repossesion common? I can't imagine lenders getting their money back too easily.

I always assumed those beautiful 50ftrs+ were only feasible where money wasn't an issue (or company "owned").
 
I guess you dont want lectures on saving up first even though I agree with many of the above posters that that is the best route. If you extend your home mortgage you will undou8btedly get better terms interest wise and you will be free to chose the boat and age that you want as well as to finance as much of it as you want. If you go for a marine mortgage, the likely interest rate will be higher, you will likely be limited to age of boat, it will have to be properly registered which again would prove an issue on older boats.

Can't comment on the charter market
 
Save Hard

The Marine Mortgage is a simple way to finance a boat. As was mentioned earlier fixed terms and a variable repayment period depending on interest rates. Deposit in my case was 20% of value. The risk is all against the boat should repayment become an issue.

I am of modest income and became a boat owner through hard savings over 18 years. I ploughed money into savings and used offsetting to payoff house mortgage before committing to a boat. As long as my savings were increasing each month through regular deposits then the value of early mortgage redemption was far superior than abysmal saving rates.

The importance of regular saving (as much as you can) while minimising expenditure is often not offered as a viable vehicle for generating reasonable sums of money. I would say that after the so called credit crunch I am on a par with most of my colleagues who invested the equivalent amounts. Before the credit crunch they had a much higher virtual wealth than me.

In the 18 years of working and saving I reckon I have spent about £7000 on charter fees. Which brings me to my last point.

In support of the other posters who recommend a small yacht, you can get a lot of small yacht for £7000 and would of course get a lot more sailing than you could on charter. If you can save and pay cash, make it a trailer sailor, then you can establish a nice leisure pursuit for only a modest increase in your current overhead levels.

At the end of the day I got rid of my house mortgage and took out the boat mortgage. My overheads are still about the same due to the Marine Mortgage being lower and of course the additional sailing overheads.

So get saving and buy reasonable is my advice and try and remain as near overhead neutral as possible after you buy the boat.
 
cimo said:
would never consider a boat a financial investment and therefore could never justify borrowing to buy one.

started my boat fund back in 2002. putting by what I could, when I could.
6 years later bought my boat. Spent the years in between crewing & learning, deciding what I wanted, and determining how much I was willing to pay.

All I have to do now is kick the tobacco habit to pay for the maintenance.

who was it said "you can have anything in life, but you can't have everything"!?

Is boat repossesion common? I can't imagine lenders getting their money back too easily.

I always assumed those beautiful 50ftrs+ were only feasible where money wasn't an issue (or company "owned").
Click to expand...

As an opposite point of view, we bought our boat in 2005 and put 60k on the mortgage. We shrunk everything else to make it fit, by doing all maintenance ourselves, shopping round for everything, spendinf all our spare time on th eboat, mothballing sports cars and motorbikes, stopped going on weekend leisure breaks in boutique B&Bs etc etc.

In the meantime, we have knocked up 6 thousand miles in the boat, and countless weekends either sitting there doing nothing or entertaining the family.

On the other hand, you have forfeited 6 years of your sailing career vacillating and not getting proper ownership experience.
I paid 2k for my first boat and kept it on a drying mooring....... anything rather than blag rides for 6 years....
 
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