Owning a boat or a yacht is, without a doubt, a very good investment if you are passionate about it. However, as you may know, marine property requires a lot more maintenance and care than, for example, a car or a motorcycle. You have all kinds of expenses, ranging from fuel, supplies, marina fees and even the winterizing costs. Therefore, owning a boat is considered to be q uite expensive.
If you are looking to buy a yacht or a boat and planning on getting a loan from a bank, there are some things you have to keep in mind before you actually request a loan. You might think that if the price on the boat is, for example, $30,000, you need to ask about the same amount from the bank. Well, if you can afford to cover all the other expenses from your own pocket, then the answer is yes. The expenses you have to consider are: boat operating costs and boat maintenance.
Depending on what kind of boat you would like to won, these expenses may be quite different. Larger yachts and boats require a bigger budget to keep them in a seaworthy condition. The storage costs at the marina are also higher. If you are buying a yacht, then you probably will not spend as much money on fuel as if you would in case of a powerboat, especially if the boat runs on gasoline.
Also, be sure to plan for regular repairs and inspection expenses. You want to keep the condition of your yacht in check in order to avoid costly repairs caused by serious corrosive damages.
After you have considered all the expenses you might have and what type of boat you are planning to buy, you have to decide on what type of loan are you going to get. This also depends on your financial condition. If you would like to repay your loan every month in equal shares, then a fixed rate loan is what you need. The monthly payments and rates will be stated in the loan agreement you will be signing and you will know exactly how much you pay and for how long.
The economic situation, however, is not a constant and interest rates may change over time. If you would like, you may ask for a variable rate loan. This type of loan does not have fixed interest rates, they change according to the market interest rates. So if the interest rates drop, you will be paying less cash every month. However, this can also play to your disadvantage if the interest rates go up.
There is another type of loan that is appealing to the people looking to get a loan, because the interest rate on it are lower in comparison to other loan types. It is a balloon payment loan. It is usually issued to short-term borrowers and for relatively small amounts. The low interest rates are compensated by a much larger final payment at the end of the loan term.
The process of getting a loan for a yacht or a boat is very much like getting a loan for some real estate. You will have to prove to the bank that you are able to pay back the loan by providing your financial statements and other paperwork, depending of the bank. One more thing to remember is that the interest rates for yachts and boats are usually higher than the ones for houses or cars, for example. This is because boats are not considered a necessity.
You might want to consult your yacht broker and dealers on the matter of boat loans, since they usually have a lot of useful contacts and can also help you choose a boat that will fit your finances.