Buying a boat series [Part 5]
Weeks before we even booked flights to Florida to look at boats, I was on the phone speaking with loan brokers. It didn’t seem like it was going to be an issue to obtain financing – we have excellent credit, solid income, and zero debt. The plan was to get pre-approved for an amount higher than we expected to actually need, so that we’d be ready to put in offers. Per usual with buying a boat, the plan definitely did not happen.
Our fatal flaw
This is our first yacht purchase. Period – that sums up all of our issues.
The loan broker asked me about general financial information – assets, income, debt, etc. She didn’t seem to think there would be any issues getting pre-approved for a loan. Given how far in advance I was working with her, she took her time getting back to me and providing documentation/forms to fill out – which would have been fine except she forgot to ask if we’ve owned a boat before.
Once she found out this was our first boat purchase, the whole conversation was about how we would not be able to get financing or at least not as much as we were asking for. Okay, no big deal – we’re happy to put more than 20% down. Of course, that doesn’t matter. Nothing matters except that this is our first yacht purchase.
Obtaining financing
We began to slowly understand what the banks were looking for in order to provide financing:
- Prior ownership of a similar sized and priced vessel
- 3 year or more repayment history of a loan value more than 50% of the loan amount you’re looking to obtain
- A home mortgage, business, or something that gives you strong financial ties to the US (a US address, US job, and lots of family does not count)
- Liquid assets that can cover the full purchase price of the boat (ironic since you’re looking for a loan)
- Not living aboard the boat, but have a physical address near the boat (they don’t want you living on it full time, but you also can’t be an absentee owner that only visits a few times a year)
- Plus all the usual that you would expect:
- Secure, steady income stream(s)
- Strong credit
- 20% down payment
- Proof of insurance
- Your first born (kidding – mostly…)
I would also just add, that you should be prepared to spend hours collecting all the necessary documents that the banks will want to see in order to verify your financial situation. Don’t be naive like us and think that you can simply provide a couple tax returns and credit report.
Exploring other options
Fast forward a couple months – yes, months. We are approaching the closing date on the boat, and finally get confirmation from the original loan broker that she can only obtain financing for us of about 1/3 of what we were looking for. That took months to finally get that answer – awesome.
In the mean time, we had been reaching out to numerous other brokers and banks trying to understand if we had some other options. The best option that we came up with (and actually had some success!) was securing a personal loan through LightStream.
Tangent: LightStream is an online division of Sun Trust bank that provides simple, quick personal loans to individuals with good credit for a variety of purposes. The loan amounts range between $5,000 to $100,000 – which for yacht purchases may or may not meet everyone’s financial needs. Overall, I would highly recommend checking this out as an option though. I was approved for a competitive fixed rate loan within 24 hours!
Although it never came to it, we also discussed the following options:
- Paying with cash (and then being very cautious with subsequent expenditures)
- Obtaining personal loans from local banks
- Borrowing from family members
- Cash secured loans (where you basically reverse borrow on your liquid assets)
- Purchasing a cheap house (read mortgage) to improve our application
- Probably a dozen other ridiculous ideas
Switching loan brokers
Based on another recommendation, we urgently reach out to a new loan broker hoping for something better (but learning to keep our expectations low). Miraculously though, this individual far exceeded our expectations – she was simply amazing! She was able to secure us two loan offers – one of which was sufficient for our needs!
Unfortunately, this was really only the first step. There was the constant back and forth with insurance, and ALL THE PAPERWORK. Not just simple fill out in person or online paperwork either, but just piles of files delivered electronically, to be printed out, signed and notarized. I guess if we had purchased a home before, we would probably have been more prepared for all the effort – but we were not.
During these past couple months, it has honestly felt like a full time job trying to secure insurance and financing. Which would be fine, except we both already have demanding, full time jobs. If I was to count up the number of hours we spent on the phone and emailing with finance and insurance professionals – you wouldn’t believe me.
We’re almost there though – we *almost* own a boat.
What challenges have you run across when it comes to securing marine insurance or financing? Let us know in the comments below – misery loves company!
