The Buyer’s Guide To Yacht Financing
by Sumona Finance 31 December 2021
If you have decided to take the plunge on buying a new or pre-owned yacht, do not let financing get in your way. Arranging for this purchase is not different than purchasing any other type of vehicle, and some great rewards come with it.
Some reasons why people may want their next yacht loaned out could be realistic down payments (especially if they’re used yachts), longer payment terms than what’s offered at car dealerships these days, lower monthly installment rates.
This article will provide basic information on what to expect in yacht financing.
How To Get A Yacht Loan
It is time to go ahead and make your yachting dreams come true! You have figured out which type of yacht best suits you, shopped around in search of the perfect one, and narrowed down all choices. Now it is just a matter of pulling out our wallets (or checking them twice) when we need financing.
In order to obtain a yacht loan, there are only three steps you need to follow:
- Identity and price the exact yacht you want.
- Identify and price the yacht insurance you need.
- Initiate the purchase.
Why Finance a Yacht Loan?
With the right financing, you can enjoy your yacht without worrying about getting access to capital. Most buyers seek loans when they purchase because it allows them to keep their money in pocket and deduct interest expenses on these loans if filing taxes (or avoiding tax).
Financing will make life easier for those who work with someone that understands how things are done.
Information You Need To Secure When Acquiring a yacht Loan
Finance majors should make sure to check their credit history before buying a yacht. They will also want to verify income and assess the budget.
And consider down payment that could lead them into debt if not careful about paying it off each month with interest charges on top. In addition, they need insurance for themselves (and sometimes other people) which can add up over time too.
These expenses may or may not show up in your monthly bills, so be mindful of what’s coming out when you’re putting together an estimate of how much money will go towards such things.
The buyer needs all the documentation needed. Including a personal financial statement(s), tax returns, loan specialist meeting details like date/time scheduled, etc.
What Lenders Look for in a Potential yacht Buyer?
A high net worth candidate will appeal to lenders. They want to know that you are not already overextended with other loans, and they also look for liquid assets such as stocks or bonds, which can cover 12-16 months of payments.
In case something happens unexpectedly. Steady employment is essential too. Since it shows how you are eligible and able to pay the loan you tried to get.
The Typical Down Payment for a Yacht Loan
The size of the down payment required will depend on several factors, including how old and/or expensive your yacht is. You can expect to pay 15-20% for most Center Console or Sportfishing yachts with an initial price tag of less than $150K.
However, this percentage increases as prices increase (slightly). There may also be other financial assistance available through lenders that could allow you to qualify based upon certain criteria such as higher credit ratings if needed – just ask them about what they have in store.
Time-frame of a Typical yacht Loan
The average yacht loan is for 15 or 20 years, which means lower payments but more total interest paid. Marine lenders extend longer terms on these types of loans than local banks and credit unions because you’re likely to have a great rate from them as well.
Representatives know what kind of borrowers lenders seek out when looking at rates – they can match your needs with those most likely to offer low-cost financing in return for high returns.
Fun Facts and Red Flags
If you’re looking for a way to save money on your taxes, taking out loans might be the trick.
As long as it’s not more than two years and there are specific requirements in place (a bed, galley space- plus if an engine is installed), then any interest payments could potentially get tax deductions from federal returns.
A family trust is appropriate if you want to put your yacht in the hands of an individual or company that can maintain it for future generations.
However, be sure those with access will have enough money as fees associated must always be considered before signing on anything.
And more individuals opt for single-asset limited liability corporations since these vehicles provide tax benefits when they sell their yacht after use is over – but this only applies if we’re talking personal usage.
Financing is not just for the price of your yacht. Hard or tangible assets can often be rolled into a loan. And these may include electronics, anchoring packages (which help keep you in place), bottom paint & extended service plans – which means they’re things like maintaining engines.
That said- financing doesn’t cover labor costs to install those electronic devices that apply that beautiful Pristine White across every square inch before commissioning it as new.
yacht dealers and brokers are the perfect resources for yacht buyers. They have relationships with lenders, insurers, surveyors – even repair facilities.
As an informed customer, you may want to contact them before making your purchase decisions, if at all possible. These people know their way around yachts better than anyone else.
You’ll find that they can walk new borrowers through the process step-by-step, so there are no surprises when it comes time to get on the water in one of the said vessels later down coming summer months or winter seasons.
Now, for the red flags: Insurance is a must-have before loan closing. Your broker can help you find reputable yacht insurance agencies that will cover all your bases and not hurt the pocket.
Liveaboards are frowned upon, so if you want to live on a yacht and not pay rent or mortgage, then be prepared for some hurdles.
Eviction laws make it difficult (if not impossible)to repossess one’s property even though they may have been living in the said vessel as their primary residence at some point prior. It is possible with enough planning that financing your liveaboard will not pose too many problems either way.
If you are looking to buy a yacht and finance it, do not forget that some lenders will not go through with the deal if they know it will be used for commercial purposes. The process of getting approved can take time, so make sure this type of vessel is right.
With the recent increase in popularity, used yachts are finding their way into many reputable dealerships. However, there is one big difference between new vessels and these older models. It can make financing more difficult.
The first step in buying a yacht, whether it’s new or used and comes with all sorts of bells, and whistles can be daunting.
For example, you will need to survey or appraise the vessel for fair market value, which means hauling out at least once (if not twice), paying other costs like dock space during dry-land storage periods.
While your purchase is being finalized on paper. Some banks will require comparable properties, so assure these details are figured out beforehand because they might affect financing options.
Finally, do not forget about all of the costs that come with owning a yacht. For example: buying an expensive vessel does not necessarily mean you will finance only $400 even after a down payment.
You must factor in fees for U.S Coast Guard documentation ($500), surveys for older vessels (approximate cost depends on how long it takes), and insurance coverage, among others, to make sure everything is taken care of when purchasing your new yacht.
Make a Lifetime Memories
Finally, it’s time to enjoy your purchase. Get out on the water and have fun with a yacht in excellent condition.
Spend some quality time doing what you love best: fishing or just kicking back as all of those hours behind the wheel are finally catching up with rewards for hard work put forth throughout each day. But don’t forget about regular maintenance – after every use.
Make sure that everything is cared for properly, so nothing breaks down during future adventures at sea.
Ignite a lifelong passion for yachting. And make memories that will last your entire lifetime with the yacht of your dreams if you collaborate with our trusted yacht financing company, Jetloan Capital. They educate and support you and show you the best possible offers in today’s market.