There's no such thing as a stupid question? This one might be

[Matt300ZXT]

So since I'm looking around on Yachtworld at some sailboats that tickle my fancy, I've come across a few that I like and am just using the financing calculator to play with some numbers and I'm curious about something with boat loans from whomever they use with that loan calculator. Also, I've never bought a home, so the only loans I'm really familiar with are an auto refinance from a credit union, and a personal loan from them I used to buy a motorcycle that was a little too old for them to loan as a motorcycle specific loan. Since my knowledge is probably lacking, please forgive my ignorance.

So, let's use an example boat:

One sailboat I have saved in my favorites is a 1974 C&C 35 MK II. They're asking $15,500. Let's say I put down $5,500 cash with it. With the basic plug ins on the loan calculator, that leaves me with financing $10,000, at 7.24% for 15 years (all default info), which is a whopping monthly payment of $91.23 a month. When that is multiplied times the 180 months, that is $16,421.40...a sizable chunk more than what I borrowed, which is just the way business works and I understand that.

Where my question lies is, is this like a home loan where I could pay the $91.23 a month and then make a 2nd payment of an extra $100 a month to pay the principal down and maybe pay it off in 4 years instead of the 15 (the 4 years is just a hypothetical number) and save myself tons of interest payments? Or are boat loans usually set up to where I'd be paying the $16,421.40 no matter if I pay it off in the default 15 years or 4 years?

I'll probably just end up buying a sailboat cash and not using any financing, but maybe I want to finance part of it to save me some upfront costs and have some money leftover for maybe some needed repairs or something. Either way, it'd be good info for me to have.

[Kettlewell]

IMHO for a boat costing that much get a personal loan, or even use credit card 0% cash advances and keep rolling them over if you need the cash now. Don't go through the hassle of getting a boat loan in the first place, especially because an older boat like that will be very hard to insure. I suspect you would find it very hard to get a boat loan for a small older boat like that.

[Matt300ZXT]

Originally Posted by Kettlewell

IMHO for a boat costing that much get a personal loan, or even use credit card 0% cash advances and keep rolling them over if you need the cash now. Don't go through the hassle of getting a boat loan in the first place, especially because an older boat like that will be very hard to insure. I suspect you would find it very hard to get a boat loan for a small older boat like that.

That was just one I picked, as it was the first in my list. I kind of figured a personal loan would probably be much easier and smoother for something about what I'm looking at. But, if I decided to get a larger boat that'd make living on it, should I choose to, easier, then spending more (and having the knowledge of how the loans work) could be beneficial.

[Lee Jerry]

Most loans these days do not have a pre-payment (or early payment) penalty. Of course, some might, so that would be what you want to look out for in the contract. (The loan officer should tell you, and/or you tell them you want it that way.)

But you may need to know how or when the extra payments are applied. In the old days, some lenders only applied them once a year rather than when sent in. (That should be rare these days.)

Finally, if you know you can make the higher payments, it's probably better to just get a lower term (length) loan to begin with.

[boatpoker]

When your 50 year old diesel engine takes a dump will you have to borrow another $15k (if you do it yourself) to replace it ?

[TrentePieds]

hm... If you cannot write a cheque for the full purchase price - and be sure without looking at you bank account that it won't bounce - you simply aren't ready to buy the boat!
TrentePieds

[pdx_sailing]

I saw a posting online recently that said if you can't lose all the money you put into a boat, you shouldn't own the boat. I am not sure I 100% agree but I don't disagree either.

I own a boat that is more project than I understood at purchase and after to many hours and dollars to count, I read this on this forum "everything on your boat is broken, you just don't know it yet." possibly the truest thing on the internet.

This might not be the right time to take out a boat loan in your life, or it might be the best decision / risk you ever make.

[Foswick]

TrentePieds comes off as pretty elitist here, so it's pretty easy to disregard the advice.

But, there is some underlying truth here. I'll try to get to that in a more helpful way.

A pretty good rule, when buying a used boat, is to plan on spending the asking price over again. That is, a $15,000 dollar boat is likely to easily take another $15,000 to fix up. But, you should usually never pay the asking price unless you really know it is a good deal. So, offer $10,000 and settle at about $12,000, but still plan on $15,000 in work. (I'm just throwing out numbers - I am obviously not looking at a specific boat.)

By the way, this rule doesn't really have a sliding scale. It is just as true for a $5000 boat as it a $105,000 boat. (Though, it maybe starts to slide a bit above that.)

Now, not every boat requires that much work. But, if you don't really know what you're looking at, you can't entirely count on a surveyor to clue you in. So, you should just plan on the double-rule. You might get lucky, and come in under budget. But, it is also possible that double the price is not enough.

So, contrary to TrentePied's glib dismissal, there is absolutely no problem financing the purchase of the boat. But ... and this is important ... you must be able to afford the next $15,000 (or whatever), probably without taking out another loan. If you can't spare that money, buying a boat is very risky.

Myself, I would never borrow money for any boat or any boat repairs/improvements. I could go into my reasons, but those might not apply to your situation and attitudes.

Some people will tell you, "Well ... I did this" or "I did that". You can always find someone who paid $10,000 for a boat worth $20,000, and only had to put $1.37 into her. Just remember that those people either got lucky or they leveraged considerable experience (their own experience or that of others).

[grantmc]

Whilst you've invited opinions Matt, but I suspect offering advice is perhaps going too far. There's not enough information to extrapolate to issues beyond your simple questions. Irrespective I'll frame my response to what I've experienced.

I borrowed to buy my first yacht. It wasn't a big loan, I think about $4k, and represented half the boat's value. I should add I bought the boat 50/50 with a friend and so my 8K plus his 8K met the sale price. The surveying was done by a local boat builder and he charged $60 (yes it was a while ago), plus we had to pay the cost of the lift whether the sale went ahead or not.

Although I do admit that as I've gotten older and more stupid I'd not borrow on a boat today and I never have since. Small pleasure boats aren't assets, even if they can be used as a pleasant home.

I'd heard that old cliche too about 10% of the value needed each and every year for maintenance (urban myth), and a big factor in ownership costs has to do with where you house your boat. Marinas are all expensive.

Someone raised the issue of engine repowering, and yep it can be horribly expensive. I faced that problem when my old Yanmar died and spending more money over an 18 month time frame was really not making it any better, just making me poorer, I just didn't have the cash to repower. It was a difficult decision oh and by that time I'd bought out my friends half, so 100% my decision and cost by then. But I improvised, as I often do when the cost is beyond my budget. I dropped a little outboard on the stern and that did me for the next 5 years whilst I saved up to replace the engine.

I both experience and observe that maintenance offers a degree of flexibility and optionality. Look at boats in any marina and you'll find a cross section of those in Bristol fashion and a good many looking neglected and tired. People have differing views as to what degree faulty things is acceptable to themselves.

An issue too, at least for me, is the temptations of 'stuff'. What I mean is that there are so many optional extras that can make life easier, but make your boat more complex and syphon off your hard earned cash. Take some simple examples, say a fridge, electric toilet, solar charging, water maker, alarm systems. There are countless ways to spend money and add complexity. I've an entire locker devoted to 'stuff', (all still in their boxes), that one day, when I have nothing better to do, I will install, fit or otherwise make use of. Ahh the temptation of the ubiquitous boat shop or marine web site just so welcoming to a mug like me.

If I were just going to live on my boat and not actually sail much (and many many owners are in this camp), then my needs are very different from a world cruiser constantly on the move.

And in the last 5 years or so I've spent much of my time living in the third world and I see daily how very poor people take improvisation to a next level. I never knew there are so many uses for duct tape.

So what a boat costs is really all about what it's owner is doing with the vessel and he/she's level of frugality and also acceptance of stuff that doesn't work. So my only suggestion would be to consider carefully that issue.

[Kd9truck]

I paid cash for every vessel I have owned,(last one was 80k) the same with everyone I know with a boat, buying the boat is just the beginning of the money needed.

If it’s not a necessity and you can’t pay cash? you can’t afford it.

Cheers

[wholybee]

Originally Posted by Matt300ZXT

So since I'm looking around on Yachtworld at some sailboats that tickle my fancy, I've come across a few that I like and am just using the financing calculator to play with some numbers and I'm curious about something with boat loans from whomever they use with that loan calculator. Also, I've never bought a home, so the only loans I'm really familiar with are an auto refinance from a credit union, and a personal loan from them I used to buy a motorcycle that was a little too old for them to loan as a motorcycle specific loan. Since my knowledge is probably lacking, please forgive my ignorance.

So, let's use an example boat:

One sailboat I have saved in my favorites is a 1974 C&C 35 MK II. They're asking $15,500. Let's say I put down $5,500 cash with it. With the basic plug ins on the loan calculator, that leaves me with financing $10,000, at 7.24% for 15 years (all default info), which is a whopping monthly payment of $91.23 a month. When that is multiplied times the 180 months, that is $16,421.40...a sizable chunk more than what I borrowed, which is just the way business works and I understand that.

Where my question lies is, is this like a home loan where I could pay the $91.23 a month and then make a 2nd payment of an extra $100 a month to pay the principal down and maybe pay it off in 4 years instead of the 15 (the 4 years is just a hypothetical number) and save myself tons of interest payments? Or are boat loans usually set up to where I'd be paying the $16,421.40 no matter if I pay it off in the default 15 years or 4 years?

I'll probably just end up buying a sailboat cash and not using any financing, but maybe I want to finance part of it to save me some upfront costs and have some money leftover for maybe some needed repairs or something. Either way, it'd be good info for me to have.

Generally, you can pay off a loan early or at a faster rate, and end up paying a lot less. But read the details, as some loans have a prepayment penalty. So really the only person that can answer is the lender, or read the contract.

My advice is to get qualified by a lender or credit union before you go shopping, and don't use the online calculator. You might not qualify to get a loan for a boat for 7.25%. I would also really think hard about buying a 1974 boat with a 15 year loan. You will likely still be making monthly payments after you sell the boat, and don't sell it enough to pay off the loan. And you will need insurance, a place to keep it, etc. Figure that out before you buy anything. Insurance is very difficult for some people to get, and in some areas a slip could be $1000 per month.

[Statistical]

Originally Posted by TrentePieds

hm... If you cannot write a cheque for the full purchase price - and be sure without looking at you bank account that it won't bounce - you simply aren't ready to buy the boat!
TrentePieds

This. Boats are luxuries. Dealing with the costs of a boat is much easier with finance payments on top of everything else. I would say it is double true right now with high interest rates and a $15k boat.

However to the OP yes you could finance it over a shorter term or make additional payments to pay it off faster. That calculator aside most banks have maximum loan length based on both the age of the boat and the total amount. It is unlikely anyone will even let you finance $10k over 15 years on a boat which is already 50+ years old.

[S/V Illusion]

Never finance a depreciating asset. An old but true adage. If you have to finance a boat, you can’t afford it. Save your money. That’s not “elitist” thinking. It’s common sense. And while there may be limited and narrow exceptions to the above, none apply here according to his story.

[Foswick]

Originally Posted by S/V Illusion

Never finance a depreciating asset.

I considered bringing up that nugget, but decided against it. Boats don't really make financial sense to begin with. A bit of interest on top of that is a tiny drop in the bucket compared to all of the money that goes into the boat that you'll never see again.

[Don C L]

"Never spend more on a boat than you are willing to lose"

"If you have to finance a boat, you can't afford it."

I'd say those two sum it up pretty well.

But I too have been severely tempted by a beautiful boat to consider financing! I am so glad I didn't.

By the way, I would think that asking price is pretty high for that boat unless it is in REALLY good condition. Make an offer you can afford and see what happens.

When I refinanced my home for a low interest rate, I took out some cash too. That would have been a way to buy a boat. But refinancing now would be foolish.