Important questions
The last thing any person wants to do when attempting to secure a yacht loan is to become financially overstretched. This is why you need to sit down with your financial adviser and establish a maximum boat management spend.
Only once this has been done can you begin to look at the question of your yacht loan.
However, even once you have identified how to finance a boat you love, actually achieving ownership can be difficult. This is because seafarers and wealthy cross-border individuals must negotiate the numerous international regulations and international sanctions policies that exist in relation to yacht finance.
Depending on where you, your business and your assets are located, it may be more or less difficult to secure financing for a boat. Not only do lenders want to understand your circumstances and where these fit with their various criteria, they also want to be sure that they have suitable recourse in the event that they need to enforce the boat loan.
How to finance a boat
Once you’ve established how much it will likely cost to secure a boat loan, you should explore each avenue, in regard to how to finance a boat and what to do about ownership. Common arrangements include:
Purchase financing
Depending on your credit score, securing financing for a boat needn’t be that complicated, and it’s even possible to take a boat away the day you apply for boat finance. Going through the bank is often used by individuals slightly shy of the overall amount, and looking to top off their purchase.
Yacht loans from specialist providers
Securing a boat loan from a specialist provider depends on your current credit score, size of deposit, the condition of your yacht, and your proposed usage. Each factor will be weighted by your boat finance company, to give you an overall figure. It’s important to remember that going through an independent boat loan provider will often garner steeper interest rates than making an equivalent application through the bank.
Taking out a home equity loan
Taking out a home equity loan to help with yacht financing is dependent upon the level of equity you currently have in your home. This could be a good avenue to follow, as a means to secure boat finance, but you should ensure you leave yourself with enough funds and security to continue making the payments tied to your house.
Refinancing
Refinancing, in short, allows you to renegotiate the terms you’re currently signed up to – saving you money and giving you full ownership more quickly. This is a potentially positive path to follow, if you feel you can get a better boat loan offer midway through your agreement. Naturally, this is only applicable if you’ve already entered an initial boat finance contract.
How much is too much?
You should be sure that you haven’t borrowed too much when applying for yacht finance. At the highest end of the boat loan cost spectrum, most lenders will not finance more than 50% to 60% of the overall price. Subsequently, this usually requires you to commit to some form of investment relationship in return.
In some cases the yacht itself may be seen as sufficient security. However, in some situations, lenders may ask for further security before agreeing to a loan for a boat – it is up to you as the buyer, to decide whether you wish to keep your boat finance separate from your other assets.
It is important to remember that higher-end yacht prices have dropped significantly since their peak in 2009 and the yacht finance industry has adjusted boat loan to value requirements in response – presently finding financing for a boat for more than 60% is a difficult task.
Blacktower FM, Wealth Management for Seafarers
Blacktower FM can help seafarers and cross-border individuals with all aspects of yachting financing, and associated wealth management.
Whether you earn your income in USD, EUR, GBP or another currency, whether you reside in the UK, the EU, the US or elsewhere, we can help you negotiate the many complexities and regulations that crop up with yacht financing
Contact our independent financial advisers today for more information.
Disclaimer: The above information was correct at the time of preparation and does not constitute investment advice. You should seek advice from a professional regulated adviser before embarking on any financial planning activity.
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