Home Equity for a boat?
 

So I got this flyer from my mortgage holder stating I have $60k in equity in my home that I could use, at 5.25% and would only be $263 bucks a month addition to the mortgage payment.
Anyone here use the equity in there house to buy a boat before? What were the pro's and con's?

CON: Most homequity loans are variable rates.

PRO: you can insure it for as little, or as much as you wish, not what the loan provider tells you since the loan is secured by your homes equity, not the boat.

I am thinking of doing the same.

Been there done that...
 

be very careful,,,

Did not like that at all, did it on the first boat...

If your world crumbles, you are gambling some with your equity in home. My opinion, get a fixed rate boat loan secured by the boat and if things go to hell, at least you can retain some of which you have worked for.

I would bet rates are very good still for fixed loan.

Ck with Von Bongo, Mitch Stellin and others on board for their rates.

I agree with downtown 42 totally. I'd rather give up the boat than my home.

The Family has spoken.....boat loan it is!

Depending on the boat there may be no advantage. The 2 possible advantages would be maybe a lower rate and possible tax deductions. Most of the offshore boats already have the v-birth, potty and "galley" to qualify as a second home.

Boat rates last I checked for up to 20 years fixed were 5.25-5.75% fixed. They might be up a touch I just haven't looked at them for a couple weeks.

I went thru Coastal Marine and have a 15yr at 5.5% fixed, no balloon either. The Bank I work for was a full % higher. The HELOC is a variable rate and and when the Fed starts raising rates you will move with them. As long as you have a sink you can write the interest off anyway. I can give you the number for Coastal, it is 616-494-2628, ask for Chris. No fees either.

Just so there's no confusion, here's the text on Interest deductions on boats, straight from IRS publication 936:

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

http://www.irs.gov/publications/p936/ar02.html#d0e495

If you search hard enough, you can get 5.25% on a boat loan.

National City Bank writes a lot of boat loan notes and as it is a substantial amount of their business they want you to have a smooth ride through the process and be a returning customer. You see them often at boat shows.

Bank One is great with Home Equity loans , fast approval and some at 125% of value if you REALLY want or have to go that route.

Standard Fed/ABN AMRO seems to be more into 1st Mortgages

Hope this is helpful

Essex had 4.79% for 20 years. Did it three weeks ago.

I have a girl out here that worked a deal with her company, You guys will love this:

Can finance C paper
Can do boats with 3 engines
Max HP is over 2000
And she and the company both have a history of dealing with Offshore Powerboats (This will help with documentation and Survey)
Jodi Brandon (Formerly of Essec Credit)
And the Company is New Coats Financial.
I talked to her yesturday and then met with a Sales Rep at the boat show. They know there stuff.
Her direct Line 949-933-4573.
I am sure this will help many on the board with one or more of the above issues.

Good luck!

I refinanced with Jodi last summer while she was still with Essex and was happy with how everything worked out.

I will check with her when it comes time for the loan on the new boat...

IDR what is c paper?

Lenders use these three factors to assign a grade to your loan. A-paper is the highest-quality loan, and D-paper carries the highest risk for the lender.

Credit rating: Lenders review your credit report to see whether you pay late, have defaulted on debts or filed bankruptcy. Borrowers with no late charges for the past seven years usually can qualify for A-paper loans. B- and C-paper loans usually are issued to borrowers who have incurred late charges on mortgage loans, installment loans or revolving charge accounts. D-paper loans are based mainly on the equity in your home, not on your credit.

Many lenders use a credit scoring system to assess credit risk. Three national credit reporting companies, Equifax, TRW and Transunion, supply lenders with scoring systems that predict the likelihood that an existing account or potential borrower will become a serious credit risk.

The higher a borrower's credit score the better the credit risk. A-paper loans usually require a credit score of around 650.

Debt ratio: Lenders generally analyze two income-to-debt ratios.
To qualify for an A-paper loan, your debt ratios typically must not exceed 28/38. The 28 percent (front ratio) measures your monthly housing expenses (principal, interest, taxes and insurance) as a percentage of your monthly gross income. The 38 percent (back ratio) represents your front ratio plus the total of all other recurring monthly loan and debt payments as a percentage of gross monthly income.

Conventional A-paper loans have been made to borrowers with debt ratios as high as 36/42. D-paper loans are made with a back ratio of 65 percent, provided the loan does not exceed 65 percent of the value of the home.

Loan-to-value ratio: Also known as LTV, it looks at the loan amount as a percentage of the market value of the home.

A $150,000 loan on a house appraised at $200,000 will be at 75 percent LTV. The higher the LTV, the tougher lenders may become on credit rating and debt ratios. On the other hand, high LTVs don't deter lenders from making loans to borrowers with good credit ratings and sound debt ratios. Some A-paper loan programs will lend 100 percent LTV and in some cases up to 125 percent.

D. Ocean
Pompano Beach, FLA

Thanks. That is why I didn't know, it's not me.

Thanks Danny O. I forgot about the debt ratios.

I used Nat City. They had the best rate, 5.5 for 15 yrs. My bank was a full % higher.:rolleyes:

We have seperate loans for our house and our boat. Our reasoning behind that is because of the economy and job market. In the event something happened to either of us (whether that be losing a job or becoming disabled and unable to work) we could liquidate the toys and it would have no impact on our house. In the event it sells for less than is owed another series of tough decisions need to be made (can you swing the difference and pay over time, or God forbid, just walk away from the obligation but the house is still secure).

I hate to think that way, and I don't forsee any problems but it's important to us to make sure the kids will always have the stability of our home. Anything else is gravy.

As long as the boat has a head (porta potty), an electrical outlet, and a place to sleep it qualifies as a second home which excludes it from having to be secured by another home.

I have been thinking about the home equity loans in certain instances. I have a lot of equity in my house and I want a Gladiator. With a Gladiator I can not deduct the interest as a home mortgage so the other way around that is to use a home equity loan. It will be at least another year, maybe 2 before I buy so I will be weighing the options very hard from now until then. I HAVE to at least be able to deduct the interest to personally justify spending that much money to myself :crazy:

The key for me is having enough equity in the boat that if things do get bad; I can dump the boat and limit the losses, which with these boats means a LOT of equity:D

real easy.. not take an apprenticing asset and dump a deprecating asset

think the house will go up in vaule and the boat will go down

Exactly. I hope I'm not the only one who remembers the big devaluation in Calif. real estate (1989 ~ 92?). Foreclosure City. There was a buying frenzy, people were paying top dollar. All of a sudden, the bottom drops out and your mortgage was more than your house was worth...and it's going to happen again.

I would only use a home equity loan for two reasons: Purchase another home (investment property), or improve the home you're in.

D. Ocean
Pompano Beach, FLA

Even when I was a teenager, my auto loan was through my parents home equity line. Never from a finance company (My dad was general mgr of a car dealership). At that time, (early 1980's) auto loans were running 12%, and the home equity interest rate was only 9%.

I just made the payments to my parents, and they got the extra benefit of writing off the interest on their income taxes.

The minimum amount due was always far lower than the standard 36 month 12% interest car payment, but with the equity line, I could pay back as much as I wanted, any time I wanted. During months that were tight, I just paid the minimum.

To me, it was the greatest deal ever!

So today, I have both autos plus our boat financed on our home equity line. Our interest rate is only 4% and we get to write-off the interest on our taxes every year.

Maintain enough in savings to make the house payment and home equity payments for six months or longer, in case your financial status turns south in a hurry. (You should plan for this anyway). That should give you some time to sell the boat and pay off the equity line if necessary.



But here are some warnings:

The yearly limit on the deduction for home equity loan interest is the interest on loans totaling $100,000 ($50,000 if married filing separately). If you used all or part of the loan for your business, it might be better to elect to treat the debt as unsecured by your residence. In that way, you can write off the interest as a business expense. But once you make the election, you can't reverse it without Internal Revenue Service approval.

You cannot deduct interest on any amount of the home equity loan that is more than the difference between the market value of the home and your mortgage debt.

These rules apply to home equity loans taken out after October 13, 1987. Consult with an experienced tax preparer if your home equity loan preceded that date, you have questions or your situation is out of the ordinary.

A home equity loan may provide a tax benefit, yet may not be worth the risk of losing your home should you need to default on the loan. Remember that a home equity loan is secured by your home.

i'm not to sure that we aren't close to that again.. some banks not want to touch the laons for houses right in souther fl.. i think we are in for a correction i the housing market real soon

Here's a thought. Buy a boat when you've saved enough money to pay for it in CASH. No interest, no payments no hassles.

Take a 5 or 7 yr loan and pay it off early.

At 5.5%, money is almost free. Use it and save your cash for a rainy day or other investments. (And who here, with the exception of a few, makes enough scanool to walk in to a dealership with a briefcase containing $100k+?).


D. Ocean
Pompano Beach, FLA

EXACTLY

Some people don't understand this concept. I could pay EVERYTHING off today...but financially that wouldn't be beneficial.