Should I Pay Off My Boat Before Cruising?

[harborcruiser]

I think it all would depend on your interest rate and tax liability. This is why even if we could pay for a house / car in cash; many times it makes more sense to take the loan and pay the interest.

[Captain Randy]

Is there a pre-payment penalty? Usually a minimum time befor your can pay it off. Ours was 2 years. We are doing the same thing making double payments to pay it off in 1/3 the time. I do not nor will I owe anything to anyone when we cast off. I assume you have allot of work to do to the boat also given the boat and the price.
We have an 86 Cheoy Lee Pedrick 41 we are renovating as our sail away plan. Enjoy!

[markpierce]

It also depends on how much working capital you need to feel financially secure. If paying off the loan leaves you short, don't pay off the loan.

Paying off the loan will increase your subsequent net cash flow.

When I retired, I considered refinancing my home at a lower interest rate. Decided to pay off the loan. Without a monthly mortgage-loan payment, my bank balance increased quickly, and I had to think of new ways to spend the money.

[Charlie]

Credit Cards have double digit interest rates. I stand by borrowing money for $54 a month. Less then the minimum payment on a credit card. Of course if you don't need to use the card . . . But what boat owner has ever not needed dip into their reserve fund.

[David_Old_Jersey]

Originally Posted by markpierce

It also depends on how much working capital you need to feel financially secure. If paying off the loan leaves you short, don't pay off the loan.

Paying off the loan will increase your subsequent net cash flow.

+1

The "trick" to living happily financially is to live within your means.

And if that means putting off the "want it now" moment until later then so be it - in practice will find that you sooner rather than later catch up with yourself so do have cash in the pot to fund "want it now" stuff with own money......but be warned! - that approach gets addictive!

[Mimsy]

Our opinion doesn't matter, its the lien holders open that counts.

[Rocketman]

PAY IT OFF, that is always the answer, when you start to cruise you can leave debt free, pease of mind is worth a lot, you won't have anyone telling you. what you can and can not do, that's worth more. It can also be a very worth while goal that gives you the freedom that cruising offers.

[Mr B]

If you can afford to put a big pile of money on the ground and set fire to it and burn it,

Thats what interest on a mortgage is, Burning money needlessly.

Interest is a means to an end, It helps you get there, But reduce or eliminate the interest as soon as possible,

Cruising debt free is a real special feeling, Paying cash is even better,

What are your repayments, EG; $400-00 a month,

$400-00 per month, Nice new dink, Wait 3 months, and put a new motor on it,

It pays for your berth, Nice new Salon covers, A couple of solar panels,

Cash also gets you discounts that aren't available with credit cards, Snicker Snicker,

It took me 49 years to be debt free, and I am loving it, I can buy what ever I want,

If you can, Pay of your boat first,

But if your getting on in years, You also have a Use By Date, So I am cramming as much into it as possible, I have a use by date, I am getting on,

With penalty payments,
Pay out the complete amount that you owe, except for $200-00, Then let that sit for the full penalty time, and then pay your last $200-00 2 months after the time has expired, You only pay penalty on the $200-00
Play their game back at them,

Go sailing, Its great,

[Bash]

The day I pay off my boat mortgage, I am cruising.

Until then, it's mostly practice.

[Matt Johnson]

Use the banks money.... invest your own into something that returns more than your paying in interest. Still get the tax write off.

[Ex-Calif]

$387 X 120 = $46,440

You must have a low downpayment, a high interest rate or both.

Pay it off if you can.

The best investment one can make is elimination of debt unless that which you finance makes more money for you than the cost of the debt.

In this case the only way it makes sense to keep the loan is if you can make higher interest or return by investing the freed up cash. You pretty much can't so eliminate the debt.

[Cheechako]

Originally Posted by Don Lucas

So ................. you are ONLY losing around 85% of the interest paid with the income tax deduction! Tell you what; give me $100 and I will give you $85 back as that is the same thing.

The only way around this is if the principle balance of the loan can make a higher rate of return on investment that the interest rate of your loan.


Pay the thing off if you are able!

Yeah! It's amazing how we get lead into "saving money " sometimes. pay it off and you wont have to carry expensive insurance.... or... hmmm, dont pay it off if you are just cruising the caribe... and let the bankers take the risk!

[Rhapsody-NS27]

Personally, I say pay it off as soon as you can. In the long run, you're paying less overall than if you make only the basic payments. You might be short spending money along the way but it'll be all yours sooner.

[belizesailor]

Originally Posted by n8kraft

...
I'm not overly concerned about the interest because since the boat is my primary residence the interest can be taken off my taxes.
...

(Assuming US Tax Law). Do the math on this one and/or discuss with an accountant ... not actually how it works out... although a lot of people believe that it is "taken off" their taxes. The interest is not "taken off" your taxes -- it is an adjustment to your taxable income. So it only reduces your tax liability by a percentage of the interest adjustment applied (how much exactly depends upon your tax situation).

Something to take into consideration in making this decision -- that interest is not "saving" you as much money as you think.

[sailorboy1]

Originally Posted by belizesailor

(Assuming US Tax Law).
Something to take into consideration in making this decision -- that interest is not "saving" you as much money as you think.

That interest isn't "saving" you anything! It is costing you, period!