Buying a houseboat is a dream for many. The good thing is that you don’t have to be a millionaire to enjoy floating on the waters.
However, you might not like the process of getting one since negotiating for a boat loan is like haggling with a salesman for used cars. You’re likely to get puzzled by the terms, rates, and percentages.
To avoid all that, you should do your homework beforehand and avoid the chaos of financing your houseboat. Read this post to learn how you can get a houseboat loan with minimal hassle.
4 Different Ways You Can Finance Your Dream Houseboat
You might wonder if there is one definite way to loan a houseboat. In reality, you’re mistaken since there are multiple ways to get a loan. If one method doesn’t work for you, you can try the other to make things more affordable.
Have a look at these simple ways to get your houseboat loan:
Bank Loans and Online Lender
If you have an account in a bank or a credit union, you can access a boat loan. In addition, online lenders also participate in financing houseboats. You’d need to fill out an online form, after which you can connect with several lenders with loan details.
After evaluating your credit card history, you can get a loan from such platforms.
Getting your houseboat financed by a bank, online lender, or credit card union is a feasible option for many people. With this type of financing, you can expect a traditional boat loan.
However, these loans often have several terms and conditions and some offers that you can not receive from every lender.
Marine Broker Loans
As the name defines, marine brokers can make the search process somewhat easy for you. They have several connections with lenders in the market. So, they may help you get your hands on a good deal with a lot of effort.
However, one downside of taking assistance from a broker is that they can charge you high markups. This premium that you may pay for their efforts and expertise can increase your cost for a houseboat up to 10-15%.
Home equity refers to the difference between your house’s current value and what mortgage you owe. For instance, if you currently owe $140,000 on your home mortgage loan, while your house now has a worth of $200,000, then you have home equity of $60,000.
The HELOC option, also known as the Home Equity Line of Credit, can be used to borrow a houseboat loan. This alternative can allow you to get a loan of nearly 90% of your home’s value.
One great benefit of taking this type of loan is that you may have to pay low-interest compared to other loans. It may also reduce the cost of a houseboat. However, if you don’t own a house, you’re not eligible for such loans.
You can use a personal loan for almost anything. You can book a trip to the Maldives, get married, or buy a new houseboat.
However, with flexible loans, you may have to pay higher interest rates, affecting your houseboat budget. Moreover, these loans come with a certain limit. For instance, many personal loans limit around $100,000, which may not be enough to get a houseboat.
How is a Houseboat Loan Structured?
Because houseboat loans are typically larger, the payment durations are generally longer. In addition, almost all houseboat loans are classified as portfolio loans, which are loans that remain on the lender’s records and cannot be sold.
This means the lender is taking on more risk and will pass that risk on to you with higher interest rates. Typically, lenders have a variety of other strict conditions and higher interest rates.
When it comes to getting financing for your houseboat, expect the following:
Conventional Interest Rates
Boat loans typically have an annual percentage rate (APR) of roughly 4.50%, slightly greater than the average APR for home mortgage loans. The caveat, as previously stated, is that most boat loans have a $100,000 cap. This means you’ll have to either take out another loan or dip into your funds to make up the gap.
Houseboat loans generally have their interest rates fixed. As a result, you will have no flexibility in payment terms and pay the same amount throughout your loan duration.
Some boat loans are available with flexible interest rates. This means that the rate of interest and the amount owed for such loans can fluctuate. This is likely to happen in response to particular indices and the overall financial market changes. However, one possible benefit of this loan would be reduced interest rates.
Regardless, there is a risk that the rate may increase. So, if you choose an adjusted rate loan, make sure to look for interest rate ceilings and floors. You could also look into whether certain adjustable-rate loans offer an initial fixed-rate term.
Generally, boat mortgages have a down payment of around 20%. However, such high percentages for down-payment are discouraging for people to look for other financing options.
Regardless, these rates have been set by lenders to identify people who are financially strong enough to buy and maintain a houseboat.
The payment terms can vary for different loans. For example, some conventional loans have a payment duration of seven years or 84 months. In contrast, some may offer a loan that spreads over two decades.
What Financing Option is Best for You?
To buy a houseboat, you must first understand everything about the purchase. In simple terms, you should know what houseboat you’re going to buy, the material used to manufacture the boat, its underwater condition, or if you will own a docking area.
These factors can significantly impact your purchase decision. So, you should learn what houseboat you can purchase and how the municipality perceives it.
Here are some general considerations you can keep in mind:
The General Lender Demands
An outstanding credit card score and history are not enough to get a suitable houseboat loan. Instead, the loan lenders for your houseboat will be more interested in your property history and its liquidity.
For example, you will find it challenging to search for a loan lender that can offer you a loan with first-time options for a homebuyer.
To make it simple, loan lenders are interested in your main source of income and other assets that generate your income. They do so to evaluate what can help you repay your loan if your main income source ends for some reason.
In a nutshell, getting a houseboat loan is about a detailed financial picture and not just a few important aspects.
Adding real-estate stuff to your houseboat loan can motivate your loan lender. For instance, getting a slip can help you assure the loan lender that you are seriously interested in purchasing a houseboat. Otherwise, you may need to pay a monthly rent against the purchased slip.
Getting a loan for a houseboat is not a tricky task. You simply need to become familiar with a few essential details and learn how the process works. If you do enough research, you can become aware of all the tips and tricks that can help you quickly obtain a loan.