Look what got sent to me.....

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My 15 words of fame /forums/images/graemlins/laugh.gif

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Have I got a point or am I talking gibberish? I leave it open to the panel.... /forums/images/graemlins/blush.gif

(Thanks to T15 from CPB.ie for bringing this to my attention)
 
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What about the other chap who is forced to limit his wife's lobster intake?

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No comment! I remember that post on the forum, I reckon he was just being funny... I think /forums/images/graemlins/confused.gif What confuses me is that he says that AFTER he said "Joking aside" /forums/images/graemlins/blush.gif
 
Yup, you've cut back from "We used to fly Club Class to the boat..."
Must be tough running an Ferretti46 in a downturn.

/forums/images/graemlins/laugh.gif
 
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Yup, you've cut back from "We used to fly Club Class to the boat..."
Must be tough running an AZ46 in a downturn.


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My boat is about a 5min walk from my house, a plane would prob need a longer distance runway to take off /forums/images/graemlins/tongue.gif Sure if I had a 46-footer id 'just be sitting on the pontoon unable to afford to fill the tanks' /forums/images/graemlins/tongue.gif
 
I don't disagree but what always amazes me is the willingness of people to borrow against the house they live in.

To give an example:

Let's say I want a house and a boat

House costs £500k

Boat costs £200k

I need to borrow £100k to afford these items.

If there is a real prospect of not being able to meet the repayments in the future I am surely better to use the boat not the house as security because when the bank forecloses I will still have somewhere to live.

Yes, I know that this ignores all sorts of things like banks' willingness to lend against different securities, relative interest rates, the possibility of buying less expensive items which don't involve borrowing and the possibility of not having the bulk of the money already.

It's really just qustioning the willingness the Brits as a people have shown over the last 15 years or so to leverage their homes to buy other things.
 
my opinion has always been that borrowing for house is ok, in the end it is a need for the whole family and all this and usually gets you the return back more or less, unless you dont try to sell it in a recession
I think that borrowing for a boat though is plane madness, unless you dont have savings in bonds or other stuff for some years and the interest rates in these pays you the loan easily...
 
We went round it a different way. We worked out what we could afford to pay in a mortgage, then split it between a house mortgage and a boat mortgage. Result is that we pay what we can afford easily, but have a smaller house than we would be able to afford if we didn't have the boat. It is only the 2 of us, we don't need any more bedrooms and don't want to give up on the boat, so for us it is a perfect solution. As our wages go up, instead of moving up in the house market, we move up in the boat market. Not a sensible financial option for some I guess, but it works for us and gives us the life style we want.
 
>I don't disagree but what always amazes me is the willingness of people to borrow against the house they live in.

Why not? The mortgage wasn't huge in the first place (bought in the last house price crash), not excessive even with a bit of boat on it, and is now back to where it was, apart from that there's a boat that is now paid for.
 
I think you're missing his point. What he said was:

If there is a real prospect of not being able to meet the repayments in the future I am surely better to use the boat not the house as security because when the bank forecloses I will still have somewhere to live.

And I agree.

Borrowing money to purchase a depreciating asset has never made a lot of sense in my book.
 
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Why not?

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What you did was clearly sensible for you and similar strategies are similarly sensible for many people. I'm not claiming to be a paragon. When I built my house my arse was hanging out on the construction loan and the prudent course of action would have been to buy something much more sensible.

All I was questioning was the default assumption many have had that they can finance luxury items by adding to their house loan. Cheap finance if you pay it off but if you lose your job and can't pay it back then I'd rather lose the luxury item than my home.
 
Hmmm. agree, sort of. But you could always sell that luxury item to turn it back into cash to pay off part of the mortgage (could take a while to sell in current climate, though).
 
BJB I have never borrowed agianst house to buy a boat and dont support that idea, but I think you are wrong in your analysis. Let's say a punter has equity in house 300k, and wants boat costing 100k. Following your advice he buys boat on a boat mortgage £80k, and uses £20k savings to pay the other £20k. He doesn't increase his house mortgage

He then has £££ difficulties and defaults on the boat loan payments. Boat Bank seizes boat and sells if for £50k. He still owes £30k to Boat Bank. They pursue him for that debt. Now this is the important bit: he will still have to sell his house to pay the £30k owed to Boat Bank. Yes, sure the house mortgage people will have first call on the sale proceeds of the house, but the equity he has in the house MUST be used to repay Boat Bank

It is completely wrong to think that if you borrow a boat mortgage then your other assets (house) are ring fenced from Boat Bank in a defualt.

Now, I still agree your advice, but for different reasons. The benefit of the boat mortgage not house mortgage is that the boat gets seized, not the house, initially. Mr Punter has complete control (within reason) over the sale of the house, rather than being evicted and seeing the lender sell it too cheap. And he'll get more time. But at the end of the day, all your assets are on the line for any loan. And if Mr Punter delays in selling his house to pay the £30k to Boat Bank, he will get made to sell it by a court and ultimatley a bailiff will distress it, leaving him in the same "repossessed house" scenario as with a house mortgage...

It's a bit like a credit card. A debt owed on a credit card isn't secured. But if you default and have house equity you will, ultimately, be evicted from your house. It'll take longer than eviction from a house where the loan is secured on the house, but the result is ultimately the same. Your home equity is on the line for ALL your debts, whether secured or not

(Except for limited recourse loans, but they dont exist in the retail market)
 
It was intended to be a provocative suggestion. Hence the figures I used which - with 50% of the boat cost being borrowed - should have left enough to clear the loan on a fire sale without recourse to other assets.
 
Yeah but:

1. it did read as if borrowing secured on the boat meant the house was safe, and I hought it important to correct that!

2. If the boat was 50% loan 50% deposit, so could provide enouigh cash to repay a £50k loan even in a fire sale, then it would have been fine even if secured on the house. If Mr punter had gone into arrears on his home mortgage he would have fire-sold the boat for £50k, satisfied his arrears, and then been perfectly fine. That is what is implied by your (new!) statement of the facts!
 
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It is completely wrong to think that if you borrow a boat mortgage then your other assets (house) are ring fenced from Boat Bank in a defualt.

[/ QUOTE ]By "boat mortgage", do you mean in this case a private individual who asks a personal loan to buy a boat, giving the same boat as a guarantee?
If so, you're right of course, but why shouldn't a sensible buyer use the leasing rather than a mortgage, in such scenario?
 
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By "boat mortgage", do you mean in this case a private individual who asks a personal loan to buy a boat, giving the same boat as a guarantee?

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Yes, exactly. That's how virtually all bigger boat finace is done in the UK. Same as a house loan, which is a personal loan with the house pledged as collateral

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If so, you're right of course, but why shouldn't a sensible buyer use the leasing rather than a mortgage, in such scenario?

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Because, at least in UK financing, if he defaults on the lease rentals the lessor can take the boat back which means (a) if the boat is worth more than the arrears, the boater loses the excess, and (b) if the boat is sold by lessor for LESS than the arrears, then the boater still owes the shortfall to the bank, and his personal assets (house) are still ultimately on the line.

The only way to insulate your house and other assets is to use "limited recourse" loan or leasing. This means that if you default on the loan or lease payments, the lender and lessor can take the boat but NOTHING ELSE. Such loans do not exist in the UK retail market, and hardly exist in the corporate sophisticated market. Where they do exist, there is low loan-to-value coverage, much less than the 70-80% available to buy a boat on a normal mortgage.

Remember also, leasing is hardly avaialbe in the UK. It only exists in Fr and It becuase of the VAT thing, and those lease structures are really just loans strucutured as leases (as many leases are, nothing wrong with that). If the lease is structured as limited recourse (to the boat) then the deposit will be higher else the cost of the money will be higher. Banks have to be compensated if they take more risk, obviously
 
I see. I assumed that a leasing should be by definition a form of limited recourse financing, but I must admit that I never looked at boat leasing contracts in details (neither French nor Italian).
Anyhow, it sounds weird that in a contract flagged as "leasing" the lessor would be allowed to claim anything else than the boat. At the end of the day, the lessor owns the boat, so what our Mr.punter should loose if he doesn't pay is just his right to use the boat and eventually redeem her.
Though of course if he signs a contract where he's going to be liable with all his personal assets, then he just gets what he deserves.
'Fiuaskme, I'd rather change hobby than sign any contract like that.
 
What jfm means is that even a contract for, say, routine maintenance exposes all of one's assets ultimately. If Mr Punter has his boat engines serviced and fails to pay the bill of $1,000 to the engineer, the engineer will sue. Mr Punter still doesn't pay, so the engineer gets judgment. Mr Punter still doesn't pay, so the engineer gets a charging order on Mr Punter's house. Mr Punter still doesn't pay so the engineer sells the house to recover his money.
 
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