What Buyers Need to Know Before Financing Their First Boat
Purchasing a yacht or boat is an exciting milestone. Whether you‘re gearing up to enjoy weekends on the water, cruising, fishing offshore, or simply want to live the high life year round; knowing the details of how to finance your purchase is an important step to making your dream come true.
At Shelter Island Funding, we‘re yacht and boat financing experts and provide solutions that are simple, efficient and have a strategic approach. For first time buyers who are new to the marine market, it is helpful to learn about the details of boat financing so you are properly equipped to make your first purchase quick and easy.
Below is a first time buyer step by step overview of yacht and boat financing from our application through closing:
1. Educate yourself about yacht and boat financing
While similar to automobile loan strategies, boat lending is a specialized market with lenders evaluating boat conditions such as age, type and use. The typical boat loan is: Secured, using the boat as security, A fixed interest rate, for ease of mind, and usually a longer loan term, (10, 20 years + to get the yacht home)
Loan terms can differ depending on the boat type (center console, sailboat, sportfish, etc). Align yourself with a boat finance expert to find the best suited lender for your boat.
2. How much do I have to put down up front?
One of the most challenging questions first, time buyers struggle with is how much to put down. In most cases, Expect to put down 10 and 20% of boat value, but typically more for much larger or high end vessels
A loan to value ratio gets the lender comfortable and shows you are planning to buy and not just a good responsible credit risk. Good credit can give you more ability to make lower down payments and have flexible terms.
We teach customers how to make optimal use of their down payments and purchases.
3. How does my credit score affect my funding options?
Yachts are large purchases and lenders will look at your financial situation. Consider:
Your credit score, Your debt service coverage ratio (your income vs obligations), Your liquid cash reserves, Your credit history, and your financial longevity. Applicants who have credit scores over 700 (liberties vary on exact score) Would need to have a steady job and an acceptable debt ratio. Your goal is to have a complete and robust profile that makes the lender take note. Let us help you leverage your good credit.
4. Prepare the necessary paperwork
Similar to a credit card company, boat applications and charges demand a large quantity of financial records. Assemble the following documents: Financial statements ,Tax returns (latest), Bank/investment statements, Income verification, and your Application paperwork. If you are purchasing through an LLC or corporate entity, other documents are obligatory. Prepare these documents and you will streamline a smooth process in case of unanticipated delays.
5. Survey and sea test essentials
Most pre, owned, and many new, boats will require a survey prior to closing. A boat survey: Can cost you nothing or a lot. They serve to evaluate condition and value. They may also find trouble spots and maintenance issues and usually 1 to 2 weeks after ordering. Sea trials take place along with the survey in order to validate operation.
Unapproved condition (or financing) means you will not possess the boat so be prepared with other options in the rare event this occurs.
6. Obtain Marine Insurance
Insurance coverage has to be scheduled ahead of closing and premiums are determined from the following:
The size of the vessel, experience levels of customer, use planned, and region. First, time boat/yacht owners should expect a lengthy review; a professional marine underwriter is important.
7. Fully Understand the Loan Terms
Every condition is different among institutions and boat types. Aspects include: Interest rates (fixed or variable), Loan length (typically 10+ years for big yachts), monthly dollar amount, prepayment expenses, and closing costs. We help clients reach the ideal fit.
8. Closing & Funding
Choosing your boat to funding can take between 2 and 6 weeks based on: All the documents being on hand, completed survey, approved insurance, and established ownership. once it has been finalized, you will receive Loan documents, wire funds, receive the title, and transfer ownership.
Being ready and proactive can make the process quick. Beware of these first, time buyer errors such as: Pre, shopping before knowing you are approved, Ignoring a detailed game plan, and being disorganized about your plan or options.
Why work with a Marine Lender?
A preapproval is always necessary to buy your first yacht and should not be ignored. It keeps you motivated and makes your bucket list a reality! Work with Shelter Island Funding to get informed about your best finance options. The first yacht purchase is definitely a once in a lifetime moment. If you are a good fit, your vessel and loan profile will be too. Every person has a customized plan to fit their individual and unique situation. Shelter Island Funding has a focus in yacht and boat finance, using innovative and progressive approaches to:
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- Attract the most competitive finance companies
- Create workable, effective loan schedules
- Help you get to the closing table with ease
- Inexperienced buyers need insights to avoid expensive learning curves.
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A first time buyer will need to be aware that Sales tax, personal credit scores, down payments, loans, required documents, surveys, insurance and schedules are all items that will need to be addressed on the path to your maiden voyage into the yachting world. Get your ducks in a row and buy the boat of your dreams! Let Shelter Island Funding be your first step.