The way people are buying luxury items is changing. Gone are the days of needing the cash to buy dream cars, fancy watches and yes, boats. In much the same way that the mortgage system of buying houses is now the standard, financing or loans – often known as marine mortgages - are readily available for those wanting to own their own boat.
The process of taking out finance on a boat, whether it’s new or used, is straightforward. It’s a simple equation of calculating what’s affordable, and what type of boat you can get for your monthly payments. There are of course many factors to take into account when deciding on an affordable budget which is above and beyond the monthly repayment; boat insurance, mooring fees, and maintenance costs for example. Once you’ve got a figure in mind, you can begin your search for both a finance lender and the boat of your dreams.
Understanding the process of applying for a marine mortgage is the first step to getting your loan approved. Different lenders will have different criteria, which is why a broker can be invaluable in finding the best lender for your situation. Your credit rating, the size of your deposit, the type of you wish to buy, and the reason you want (do you want to live on it, for example) will all come into play. What you pay each month will ultimately depend on:
Most lenders will ask for a down payment or deposit, so you will need to calculate this into your initial costs. Often this figure is around 15% to 20% of the loan amount but will depend on the age, size, type, and use of the boat. You’re likely to get a lower interest rate for a higher down payment, or shorter loan term.
The average loan term is 10 years but this can vary, and your monthly repayments will be higher the shorter term you opt for. It is recommended to finance your boat at the lowest term that allows the monthly payment to fit into your budget.
In the same way of home mortgages, marine mortgage lenders will offer you a choice of fixed-rate simple interest loans, or variable rate loans. While it may appear that a variable interest rate is low, this can change and result in far higher repayments. Fixed-rate simple interest loans are a far less risky option. Be sure to check how long the rate is fixed for, as it usually a set number of years. Interest rates change regularly and are different in each country, but you can expect to be working with rates in the region of 3% to 8% APR.
Choosing a Lender
Be sure to shop around as there are many different lenders offering a wide array of products. Some will even include tax and the marine accessories in the loan amount, meaning you can spread the set-up costs and contribute a higher deposit. It’s easy to get swayed by impressive interest rates and low repayment figures, but be sure to read the fine print and know exactly what the terms are. Using a broker can be advantageous and they will compile a shortlist of appropriate lenders for you, as well as helping you compile all the necessary paperwork. It should be noted that different lenders may have specific requirements such as requiring the boat to have Bills of Sale going back at least five years and a Hull Identification Number (HIN) and VAT invoices where applicable.
Choosing a Boat
Now we get to the really exciting part: choosing your new boat. Whether you’re buying a new or used boat, it will help to have a confirmed letter from the lender before you begin price negotiations with a dealer. It demonstrates that you are a serious buyer and will speed up the process. There are many factors to take into consideration; do you want a sailboat or motorboat? What size boat would you like? Who will be using it? How far do you plan to travel on it? For more information check out our guides on How to Buy a Boat: A Step-by-Step Guide and Choosing the Perfect Boat before searching the hundreds of new and used boats we have for sale.
What Can You Buy?
With your pre-approved agreement in principle (or lender letter) in your hand, now it’s time to find out exactly what you can get for your monthly repayments. So let’s take a look at some examples of fantastic boats that could easily be yours for a few hundred pounds/dollars a month. We have varied the terms, interest rates and deposits to provide a range of examples.
8-metre - Sailing Yacht
The perfect first yacht for any sailor or family is a cruising yacht such as the Legend 280. At 8-metres in length, and with lots of safety features, it is easy to sail and will provide many days of fun and relaxation at sea. It has spacious accommodation for overnight trips, as well as the wealth of features such as seating and berths for 6 people.
Boat price: £20,000/$26,000
Monthly Repayment: £300/$400 per Month
Terms: 10% deposit, interest rate of 7% over 60 months
11-metre - Sports Motor Boat
Enjoy the speed and power of a sports motor boat such as a 2005 Cruisers Yachts Sport Series 3470. With its 2007 Twin 8.1 Mercruiser Engines and luxurious interior finish, it is a true pleasure boat. Sleek and elegant, this model has a full galley, expansive sun lounge areas, and a full suite of electronics.
Boat price: £60,000/$77,500
Monthly Repayment: £540/$700 per Month
Terms: 25% deposit, interest rate of 8% over 120 months
13-metre - Sailing Boat
If you’re looking for a beautiful sailing yacht with plenty of accommodation, then the Beneteau 411 Celebration model is a fantastic choice. With three cabins including the saloon, as well as a curved seating area and table, there is ample space for large families or groups of friends to get away for long weekends. The yacht has a wealth of safety and technical features making it a dream to sail.
Monthly Repayment: £720/$930 per Month
Terms: 35% deposit, interest rate of 8% over 120 months
18-metre - Wide Beam Narrowboat
Whether it’s the British countryside or Europe’s maze of canals which are calling to you, a wide beam narrowboat such as the Collingwood 60 x 12 is a charming and spacious choice. Spend a leisurely weekend cruising, or embark on a journey of several weeks exploring the best inland waterways in utter luxury and comfort. With a fully fitted kitchen, large cabin and spacious saloon, you will have all the comforts of home on the water.
Monthly Repayment: £660/$850 per Month
Terms: 45% deposit, an interest rate of 8% over 120 months
There will be different lenders who specialise in different types of loans or mortgages for different categories of boats. Boat types vary so much from narrowboat and barges to offshore motor cruisers or bluewater sailors, so it is essential to look for a lender that specialises in the type of boats for sale you wish to buy.
Where you keep the boat, VAT status, survey results, registration and use of boat all play an important part in your application. A professional broker or lender will be able to advise you on this.
It is worth remembering that a marine mortgage is a personal or business loan that is secured on the vessel. It is likely you can borrow more on a marine mortgage than you can on an unsecured loan and there is usually more flexible underwriting with a marine mortgage.
Most importantly, if you fail to make repayments on a marine mortgage your boat can be repossessed and sold to pay off the debt. Just like a mortgage on a property.
With a personal loan, there is no specific security but a court can instruct a bailiff to sell your boats or assets to pay off the debt. Try our finance calculator for yourself and see what boat you could buy….
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