financing

[dreamer*65]

Dear Tugnuts.

Hope everyone is well, and dry. However, when I was a fishing guide in Alaska, we used to say "If you ain't wet, you ain't fishing!" But when I'm on my Ranger r27, I think I'll want to be dry!

Well, I'm going to use my membership anonymity to let you all know right up front that I am not a millionaire. In fact, I am a college prof at a small school looking to retire in couple of years (or work longer if the boat requires).

I have a small, humble home that will be paid off in about 8 years, a decent 401 retirement plan, and as I mentioned in my first post, have the dream of eventually retiring, buying a Ranger r27, selling the house (not necessarily in that order), and living the rest of life (hopefully) as a happy salty dog upon my boat. In addition to that I have a credit rating that is, well, "off the hook" great!

Okay, enough about me. I have tossed and turned some nights wondering if I will be able to get my dream financed. I realize that r27 ain't cheap, but I've got my heels dug in pretty deep after a year of researching and that that's my girl. But I will defer (perhaps kicking and screaming) to other salty dog wisdom . . .

Anyway, how do you folks finance this dream? Am I dreaming too big? I've played with the numbers and on my sheet of paper, it looks doable. But are their lenders out there who would feel similarly about my numbers? The boat seems so expensive, and I feel a little financially inadequate.

What I'm asking, mates, given my profile, can this dream be accomplished? If not, it is better I know now, and start making other plans. Maybe I better just continue to upgrade my 16' Lund w /40hp of 30 some years? Maybe get a Bimini top and some cup holders and GPS?

Thanks everyone. I joined this group to have someone to talk to. Much appreciated.

 

[knotflying]

Well, the first rule of thumb is borrow money for things that appreciate in value and buy things outright that depreciate in value. However, that can be a difficult rule to follow. If it were me I would see if you could get an equity line of credit on the house and use that to purchase the boat. The interest will be tax deductible and at least you are borrowing against an asset that can possibly appreciate.

 

[BradOwens]

We financed Serendipity without any problems. Ranger Tugs hold their value well, and lenders know that. If you're buying a used boat, get a survey done by a marine surveyor recommended by your lender, and you should have smooth sailing.
By the way, as long as it has sleeping accommodations, a head, and a galley the IRS treats a boat the same as a house. Your interest is tax deductible.

 

[scross]

Send an e-mail to the folks at Trident Funding in Seattle.
http://www.tridentfunding.com/seattle-wa/
Mike Jenkins is the guy you would want to speak with at Trident about financing a Ranger Tug. They are very familiar with Ranger Tugs. Depending on your credit rating, expect payments of about $73/month for every $10,000 borrowed on a 15 year loan. That's for a used boat.
For new, Trident does that too. But it is my understanding from a couple of folks that Fluid Motion carries the paper for many of the loans on their new boats. Don't know that for sure but if you're thinking of buying new it's worth asking them about that option.
And, if you do get a loan, the interest paid should be tax deductible for folks who itemize on Schedule A of their tax returns. These boats (except the R21??) meet the IRS definition of being a "home" or even as a second home if you own your current land locked house at the same time. (IRS Pub 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.)

 

[JamesTXSD]

The following is a free opinion:

No doubt, there will be others that don't agree with this... if you are looking at retirement, what is your plan for paying for the boat? That is something any lending institution will be asking you, as well. I am not keen on financing "lifestyle" purchases (boat, RV, car, extensive vacations, etc) - it will be a depreciating asset, perhaps depreciating faster than you are paying it off. That said, I know there are plenty of people who finance boats. There is more to borrowing than a good credit rating; it would be wise to visit with your lender to see what they think you can afford, in terms of total money paid and monthly payments.

I tend to think of purchases as more than the initial price... there is insurance, maintenance, upgrades, and (big one) what you will spend to cruise. Especially if you are thinking about living on the boat. We retired 10 years ago, with our "retirement boat." Eight years later, I sold it for a bit more than half of what I paid for it, but substantial annual cruising expenses. Expenses we planned for.

Will you be staying in one place or cruising around? Marinas every night or anchoring out? If you are frugal before retiring, you will likely be the same after. I recall talking with a financial advisor who said our retirement expenses "would be substantially less than while we were working." Nope. We saved and invested while working so we could retire early, and have been enjoying the retirement. We came upon what my wife calls "fun summer jobs" (I have a Master Captain License) that have turned out to be reasonably lucrative, but changed our perspective on recreational boating.

Looking down the road a ways, will you be comfortable living in a 27' boat (for the record, I can so do that)? Will you be near family while on the boat, or are you thinking "salty dog solo"? We have friends who have given the liveaboard boating or full-time RVing lifestyle a try... and decided it wasn't for them. The dilemma of thinking a recreational activity will be a good full-time lifestyle; and, for some people, it is. For many, it is not.

Just tossing out some perspectives to consider. You and your banker/lender can decide if you can make the $$ work, but the good folks here can only give encouragement, while you decide if the lifestyle works for you.

We boat cruised (and towed) on all three coasts, inland waters, and Canada (east and west) for 8 years. We both enjoyed it. When we finish these summer contracts (4 more weeks) with our boat jobs, we will be very ready for more land cruising. (And for the record, we had plenty of experience with boat cruising and RV travel before retirement.)

Good luck with the decisions. Plenty of good folks on this forum who can tell you how they use their boats; even how much they spend on cruising. But, that decision to sell the house and move onto a small boat is one for you to make.

Best wishes.

 

[dreamer*65]

Thanks all for taking the time to share your thoughts and advice. I've got at least a year or two as I move forward with plenty of good sense that you have offered. I will keep you posted as I proceed. Thanks especially to James TXSD.

More questions to come, I'm sure!

 

[jld]

Just a little bit more of free advice (remember you get what you pay for! :lol: )

I don't have a problem with financing depreciating assets (like cars). My rule of thumb is keep the amount financed to be less than the value of the item. That way, if I want to sell, I can.

I would also look at the various interest rates you might have available to you. Just as examples, currently at my credit union:

auto loans - 2.49% for 6 years
boat loans - 7.65% for 6 - 15 years
rv loans - 7.35% for 6 - 15 years
15 home equity loan - 4.84% - 7.84% (based on the % of equity in the home)

When I retire, I plan on paying cash for my boat and rv (yet, another reason I haven't taken early retirement) and will likely finance my next truck to pull them with.

Retirement is a funny thing, as I think if you have adequately planned for it, you can retire on less money that you needed when you are still working. I know that I have run the numbers, and without a house to pay for in retirement, we actually will have more disposable income than we currently have now. Banks, however, generally like to loan when folks have higher incomes. Thus, I know that a lot of folks if they plan on purchasing (and financing) a new RV or boat, will take out the loans before, and not after, they retire.

In any case, as has been previously mentioned, only you can figure out the best path forward.

Jim

 

[scross]

Jim,
With all respect I would not recommend going to your credit union for a boat loan!
Current rates for 15 year used boat loans with 700+ credit scores and 30% down are well under 3.95% from the serious boat lenders!
These rates are very competitive with home equity loans and the interest is tax deductible as well.