kswest

I'm sure this is a better question for my accountant, but are there any hard and fast rules/ratios to answer the cash vs. finance question?

LuauLounge

My opinion is as a business owner and layperson and I am sure you will get a number of other opinions. Talk to your CPA/attorney.
If you may want an out in the future, finance it, at that point you have choices to continue making payments or return the boat, additionally, anything can be negotiated, you still may have the boat, they have the loan. If you finance and it fits in the live aboard category, interest is deductable. If it is part of your business category, some/all of it may be deductible.
If you pay cash, you own it..
Being part of the "older" generation, toys are paid in full, real estate I make payments on.
Worked for a number of generations before me........

Griff

It will depend on one's individual financial situation and also the amount and boat being considered. At this point in time, there are some boats that you can't even get loans for. Personally, I finance with decent down payment and deduct the interest under the second home rule.

seafordguy

Are you ****ing serious? Did I misread that or are you really suggesting he finance it so that he can just walk away from the payments and let another boat fill the repo yard? We could all borrow/insure/retain resale better if it wasn't for ideals like this.

kswest - It's all about the math. Can you borrow at a rate (after tax) that is above or below what you can make elsewhere (after tax). Factor in the incredible inflation figures we will see in the next few years thanks to the jackass running the country and decide.

Personally - my boat is on an equity line which is about 4% right now, and the interest is deductible so the net borrowing rate is about 2.5%. I am happy with that and since it is tied to prime I don't think it will move much in the next couple years and will certainly be lower than inflationary pressures.

Marginmn

iTrader: (1)

I was watching Cramer's Mad Money over a year ago and some guy calls in asking about his stock and mentions the fact that he is way underwater on his home that he had bought near the top. Cramer asks him what he paid for the home and what it is worth now, and there was quite a bit of difference. Cramer advises that the guy to just walk away from his home - he says to just let the bank have it back because it's gonna be a generation before it gets back to the price he paid.

There was no considering for the contract that the guy had signed, or about doing the right thing. Cramer was pragmatic: walk because it was in his best financial interest.

I was shocked and thinking that's what got us into this mess in the first place.


It's a new world out there, sadly.

seafordguy

I was real pissed the other day reading this article about how in certain depressed markets (I believe this article singled out Pheonix) people were going down the street (in the same subdivision) buying a house that was often the exact same footprint as theirs, and after they sign moving their stuff and then walking away from the original house. ****head moves like that should stay on peoples credit forever - that would keep them from doing that kind of crap.

kswest

Aside from the ethical implications of walking away from a deal you've committed to ... What bank lends money to someone who JUST walked away from a loan and left some other bank in the hole?

I've entered a couple ****ty deals in my business (regrettably), but my credit and reputation we're more important to me than saving some money by screwing someone else over. Too bad we're becoming the minority it seems.

Kyle

legend700

sadly there are tons of people who did just that which is why there is a "buy and bail" rule for most new mortgages now meanging unless you have big documented equity or car prove you can carry both mortgages you can't just buy a new one. Doesn't eliminate all the people from doing it but eliminates most. As far as why the new bank would do it as long as the payments were being made on the old house up to the point they got the new mortgage theres no reason not to.

kswest

That makes sense; at closing the new bank doesn't necessarily know the old house is going to be dumped.

yahoo

The house thing was done her in texas in the 80's big time. We had no govt bailout and we made it.

People were able to buy the house they always wanted, and were upside down in theirs. As a financial decision it was great.

It all bowls down to morals.