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2nd on the House to buy the Boat?

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Old 07-10-2003, 04:31 PM
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Default 2nd on the House to buy the Boat?

Considering the way banks are giving away money these days I have been approached by many buyers with this question. What if I take a second out on my house to buy the boat?
I have been milling over the pros and cons and I am curious what you all think.
Pros:
1. Lower interest rate with comparable credit.
2. Equity from house that has a better chance of gaining value than a boat.
3. More Banks will loan on a house than a boat.
4. Some people cant get a $200K loan for a boat without a huge deposit, although they can take 125% out of there house.
5. You are taking a loan out of your first home to buy a toy that you can right off as a second home (In some cases)

Cons:
1. If its not a fixed rate you could end up upside down in a house AND a boat with a higher rate than you would have had individually.
2. If you default on your house after taking out the loan, you better run for Mexico because BANKS HATE BOATS!!!

Let me know if I missed anything. In California we have a very inflated market and I cannot believe how many people are taking out 2nds for vacations and new cars, why not a boat?
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Old 07-10-2003, 04:39 PM
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The interest is tax deductable.

Ron
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Old 07-10-2003, 05:06 PM
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Wildthing, dont say that just yet:
Do you realize how much beer you could get!
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Old 07-10-2003, 09:17 PM
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Well, I would do that if I had found the dream deal on the perfect USED boat that I wanted that someone else had taken the initial hit on. That way, you can always turn it for what you got in it (if you treat it right) should the dollar market go sour or you lose interest and want to move on.
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Old 07-10-2003, 09:58 PM
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If you can not consider the boat as a second home then there is a tax deduction advantage with a second mortgage, assuming you itemize.

There is virtually no difference between a 15 year boat rate for an a1 customer over a 15 year fixed 2nd. Why you may ask? The second position has to payoff the 1st if they default, this puts the lender at more risk than say charging off 10-15K to get a boat sold. We see almost 100% of the seconds to places like the money store and di-teck just let them go at sale with out them even bidding.

With a second you would not need to have a down payment assuming you have enough equity BUT the boat (asset) continues to depreciate so if you sell it and financed it as a second, you may not be able to sell it and pay off the second. Down payments are to keep the value close to the depreciated value as the loan amortizes. Anyone here sold a boat at retail lately?

AS for the 125% 2nds, which would be rather be upside down in if you lose you job? Your house or your boat?

We continue to see more and more people have to come up with money at the closing of the sale of their house than ever before, some can and some can't. It is tough to see someone lose thier house or have to surrender it back at a bankruptcy because they loaded it up to consolidate their credit cards, car loans and so on. If they would have filed BK and gotten rid of the cards then they probably could have kept the house, but spend the equity and you start all over.

I am not opposed to this mind you, but make sure it is a good idea for your situation.
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Old 07-10-2003, 10:24 PM
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If you happen to loose your job what will happen if you can't make your boat payments? You'll loose your home AND your boat. I'd much rather use the boat as collateral and be able to save the house if the worst should happen.
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