In today's economy, it's more important than ever to be
well-educated on the ins and outs of boat buying. Whether you're a first-time
buyer or you're interested in purchasing your third houseboat, there are
important facts and principles to keep in mind when making this important
decision. We spoke to Helen Dolen, vice president at Monticello Banking Company
and Anna Brown from Progressive Insurance, and drew on their experience and
insight into this industry to pass their knowledge along to you.
If you live in a thriving boating market, there is likely to
be a multitude of options when it comes to getting a marine loan. While some
lenders offer boat loans in addition to their more traditional home and auto
offerings, others specialize in this business, training their staff in the
details of the industry.
It's a good idea to compare rates and terms offered by
lenders in your area before making a final decision. Options can include banks,
financial service companies and credit unions. Check to see if your bank is
part of the National Marine Bankers Association (NMBA) by visiting
www.marinebankers.org. If you approach your home institution about opening
another line of credit with them, that can cut down on the paperwork and time
required to complete the deal.
Financial service companies work hard to maintain
relationships with local, regional and national lenders, which give them
special insight into the economic situation and financial trends. Many of these
companies specialize in marine lending, so look for their advertisements in
Credit unions are an attractive choice to boat buyers, as
they give special interest rates to members and often have specialized marine
lending staff on site to help you with your loan.
According to Dolen, not much has changed over the last
couple of years when it comes to qualifying for a boat loan.
"If a buyer could get a loan before the recession, they can
get one now," she said. "As long as buyers meet the guidelines and have the
ability to repay the loan and keep their credit in check, then there shouldn't
be a problem."
That said, there are 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 a missed payment two or three years ago, that is recent enough that
it will give the lender pause. Keep up on any recurring payments you make,
including those for a car, home or credit cards.
One automatic disqualifier for Monticello Banking is
bankruptcy. Dolen was very clear in expressing this policy, so if you ever plan
on buying a sparkling new houseboat, avoid bankruptcy at all costs (or be
prepared to pay cash).
Money In Hand
Dolen suggested buyers put 20 percent down on boat
purchases, a number that applies across the board. Whether it's a 15-foot
pontoon boat or a behemoth 100-foot houseboat, that 20 percent number is a
smart starting point for buyers.
Dolen also recommends that boat buyers obtain a loan for the
price of the boat they want before signing anything with the seller. While many
purchasing contracts include the clause "dependent on financing," which would
mean any down payment would be returned in the event a loan cannot be secured,
some contracts do not protect you in this way.
"Sometimes a buyer will lose money they've paid on a boat,"
So do your shopping early and don't sign anything until you
have the money available to purchase the boat. Even if your credit is
impeccable and you don't think there will be a problem with the lending
institution, it's better to be safe than sorry.
Be aware of the sliding scale of payment amount, interest
rates and loan length: the longer the loan, the smaller the payments but the
more you'll pay in interest over the course of the loan. And in the reverse
direction, the shorter the loan, the larger the payments, but you'll pay less
For example, a $200,000 loan with five percent interest that
is paid off in 16 and a half years means you'll pay $1,500 a month and make
around $90,000 in interest payments over that time. But by lowering the payment
to $1,000 per month on the same loan, you'd spend 35 years to pay it off and
end up paying around $230,000 in interest.
Take the time to do the math when deciding how large or
small you want your payment to be.
Life After Purchase
Buying a new boat always comes with a nice, fuzzy feeling,
but don't let that get in the way of some common sense. Be sure you can afford
additional fees associated with boat ownership in addition to a monthly
payment. Insurance is a necessity, and
can range in price and coverage quite a bit.
Brown suggested taking a good, hard look at your boating
lifestyle before determining what type of coverage is right for you.
"Decide whether it's a passion or pastime," Brown said.
"Boaters will spend more time on the water if they know they've chosen the
right coverages and services for their vessel."
Will you be docking your boat at a lake? Don't forget to
factor in these fees when determining whether or not you can afford a boat.
Other factors to keep in mind are potential repairs and aftermarket purchases.
There can be a lot to keep in mind when buying a houseboat,
but by sticking to these concepts, you can enjoy years of worry-free time on
the water with friends and family, and isn't that what this is all about?
Visit Monticello Banking at www.bankatmbc.com and Allison
Brown at www.allisonpr.com.