We all know that the housing market it in the process of recovering from what economists have called The Great Recession, but how does that affect houseboat financing? To find out, we asked Joey Gottfried, with the Intercoastal Financial Group, and he has plenty of great advice.
For starters, Gottfried suggests contacting several houseboat lenders before making a final decision on what to do. Most of the larger national marine lender sources out there use the same bank sources, so the rates will typically be the same from lender to lender. But it's always a good idea to check with a few and also with your local bank or credit union. There are some inherent advantages to choosing a lending source that specializes in houseboat financing, but occasionally your local bank or credit union will have better rates. On the rare occasion that they do, make sure it's not on a shorter term, a variable rate, or a balloon product.
Marine lenders are often members of the National Marine Bankers Association, or NMBA, and focus exclusively on figuring how best to manage loans for boats of all sizes. Look for the NMBA designation, though there are many reputable and fair marine lenders who are not members of the organization.
If you are a member of a credit union that makes boat loans, be sure to contact them. They usually have attractive rates for their members, and many are interested in making boat loans. If they have marine lending specialists on staff, they should be able to offer a competitive loan.
First Things First
One of the first questions asked when looking to buy a new houseboat is what kind of down payment is required. The standard down payment for a production boat is 15 to 20 percent, but for custom-built houseboats, high performance boats, and others, expect to put down more in the neighborhood of 20 to 30 percent.
"All of the marine lenders out there have raised the bar, but houseboat loans are readily available for houseboats less than 10 years old. Loans for houseboats over 10 years old are certainly more of a challenge, but there is some exciting news on the horizon that could really impact our industry. Stay tuned!" says Gottfried. "Just ask any boat dealer or boat broker."
If you're interested in buying, it can be helpful to know of certain red flags that may appear in a credit history that will usually disqualify you from getting a loan. While a missed payment or two five years ago probably isn't enough to earn a rejection, if you have missed payments in the past two or three years, that is recent enough and will give the lender pause. Keep up on any recurring payments you make, especially those for a car, home, boat, RV, and keep your credit card debt to a minimum.
An important aspect of getting a loan is liquidity, which is how much cash you have on hand and in non-retirement investment accounts. Lenders like to know you have the long-term ability to pay off the loan. The liquidity requirement can vary from lender to lender.
When it comes to loan length (term), the standard with marine lenders is 15-20 years. Gottfried explains that most marine lenders right now are offering fixed rates in the 4.5 to 4.99 percent range on loans over $100,000, and 4.75 to 5.99 on loans under $100,000. The final rate will depend on the strength of the applicant, the age of the boat, the down payment, and what state the buyer resides in.
In addition, the interest you pay on a loan with these rates is fairly low compared to other debt you may have. Variable-rate credit card interest rates as of March of this year averaged around 14 percent, so unless you have no other debt, it is in your best interest to pay the minimum on your houseboat loan and focus on paying off the debt that is costing you much more each month in interest.
For used houseboats, there is the additional requirement of getting a marine survey, similar to a house inspection, before being approved for a loan.
Time To Refinance
Gottfried is very strong in stating that it is a great time to refinance, and that rates haven't been lower in years. Intercoastal can typically offer someone interested in refinancing a fixed rate around 4.75 to 4.99 percent on loans over $100K and in the 4.99 to 5.99 percent range on loans under $100K.
When it comes to refinancing, Gottfried can recommend a few things to keep in mind.
"First, you have to have at least 30 percent equity or pay down your balance in order to get down to a 70 percent max LTV (loan to value)," he said. "Second, you will have to provide a new survey before closing, or a survey less than six months old."
Third, he informs interested parties that they will have some closing costs, typically anywhere from $300 to $800 dollars, depending on whether the boat is already Coast Guard documented.
As a general rule, it only makes sense to refinance if you plan on keeping your boat at least another two years, and if you are able to secure a rate at least one percent lower than where it's at now.
"For example, if you are currently at 5.99 percent or higher and plan on keeping the boat at least another two years, then it will probably make sense to refinance," Gottfried explained.
Marine Financial service companies are a good option, as they maintain relationships with local, regional, and national lenders, giving them broad access to finance programs. They are experts in the marine lending field, and many are members of the National Marine Bankers Association. You will see their advertisements in boating publications, so call for rates and terms and get an idea of anticipated application turn around and funding time.
In the end, Gottfried suggests you focus your search on long-term, established marine lenders who know how to navigate the world of houseboat loans. To contact Joey Gottfried with the Intercoastal Financial Group, visit www.houseboatfinancing.com or call 678-523-7350.