Having a Mortgage on Your Liveaboard Sailboat
Boats are expensive. The majority of people don't have the cash to buy a boat large enough and seaworthy enough to live on. That's where bank loans come in. Just like purchasing a house, you can have a monthly payment on your boat-aka, a mortgage.
Unlike purchasing a house, many banks view purchasing a boat for living aboard as a risky investment. For that reason, it can be difficult to acquire a loan without either collateral, such as a house, or an impressive portfolio of similar loans that you've already paid off.
If your regular bank doesn't give liveaboard sailboat loans, then you could turn to a lender in your area that has experience with liveaboard boat loans. You may have to speak with experienced sailors who already liveaboard or check online forums to find a lender that works for you.
Pros for Liveaboard Sailboat Loan
- You aren't required to have all the cash for a sailboat at once
- More sailboat options open up with a larger budget
- Monthly payments instead of one large sum
- There are often limits for how big a loan you can get for a boat
Cons for Liveaboard Sailboat Loans
- Banks have higher-interest loans for boat loans (typically around 5%), so you'll end up paying more for the boat in the end than if you'd paid cash
- If you don't make the monthly payments, your boat could be repossessed
- Most lenders won't cover a boat over 20 years old
- Loans don't account for any work you plan to do on the boat
- You have to pay marina or docking fees in addition to the mortgage
Whether or not a loan is worth it for you depends on your situation. If you plan on continuing working while you live aboard, making monthly payments isn't such a big thing. But, if you don't plan on working while you live aboard, making monthly payments could prove difficult.
If you don't have a steady income while living aboard a sailboat, you may want to consider downsizing your current situation and saving for a cash payment instead. Just like with any purchase, the more cash you can put toward a loan, the less you'll pay in total for the boat.
Consider What Kind of Sailboat You Need
There's no rule for what size or kind of boat you should get for living on, but generally, you should consider what is the smallest space you can manage. That way, you can get a better quality boat, yet smaller, within your budget.
Think about if you need a sailboat that is ready for an ocean crossing or if you content to stick around one general area.
Do you need a catamaran, or would a monohull meet your needs? Catamarans are more expensive, and you will likely pay more for docking because of size. Though monohulls offer smaller living space, they're easier to transport, cheaper to purchase, and cheaper to dock.
Along with the size and type of sailboat, consider how much work you're willing to put into it. A fixer-upper can save you a lot of upfront cost, which is good. But, be sure to get it inspected before purchasing it so you don't end up spending more money than you expected. If you plan on getting a loan for a sailboat, the lender will require you to get an inspection done on any used boat.
If you're realistic about your needs upfront, you're more likely to find a sailboat within your budget that you can get a loan for (and pay off faster) or even buy with cash.
How Do You Plan On Paying the Liveaboard Sailboat Loan?
Just like a house, banks need to see how you plan on paying for your liveaboard sailboat loan. Some would say that freedom to be anywhere in the world is the number one appeal of living on a sailboat.
A monthly loan payment limits that freedom, because you'll either have to work part of the year or the entire year to keep up with the payments unless you have enough cash saved to fund your adventures and pay for your new boat.
If you're looking at getting a liveaboard loan, the sooner you can pay that loan off the sooner you can have more freedom. So, make sure to plan for a boat that won't break the bank and won't take all your precious sailing time away.
Kinds of Liveaboard Sailboat Loans
If you decide a loan is worth it for you, then you need to understand the different kinds of loans to get the right one for your lifestyle and budget.
Secured Loans
With a secured loan, your boat purchase acts as collateral. That way, you can get a larger loan with lower interest rates. The main downside is that your boat is collateral, so if anything happens and you cannot make the payments, you could lose your boat.
Unsecured Loans
An unsecured loan is a loan without any collateral. Even though you don't risk losing anything in the case of a default, you'll likely have higher interest rates and monthly payments with a shorter term.
Even though you won't lose your boat in case of a default, there are legal consequences. So, you should still make sure you can easily make the monthly payments and, ideally, pay off the boat within a shorter amount of time.
Where to Get a Liveaboard Sailboat Loan
First, make sure to find a lender willing to make a loan for a liveable sailboat. Like we mentioned before, some banks don't want to take on the risk of a boat loan. So, be prepared to shop around to find willing lenders and then to find the best interest rates.
Bank Loans
There are several banks that issue boat loans including US Bank, Wells Fargo, and USAA. These banks each have a maximum loan amount, the highest of which is $150,000.
With a bank loan, expect to pay 5-8% interest at least. You'll also experience some rules for what kind of boat a bank will issue a loan for. Some banks have boat size limits for loans, and most banks have boat age limits for loans.
Also, these banks only offer secured loans for boats. So, either your boat or some other asset of equal value will have to act as collateral in the case of a default.
Online Lenders
If you have great credit, you can get an unsecured loan from LightStream, which is the online subdivision of SunTrust bank. They offer unsecured loans up to $100,000. If you have less than excellent credit, you can still get a loan, but expect to pay much higher interest rates.
Credit Unions
Credit unions are a good option for people who have bad credit and don't qualify for regular bank loans.
Some credit unions offer secured boat loans for up to $500,000. Usually, you can't use the loan for any boat over 10 years old, and your interest rates are subject to be as high as 6%, even with good credit.
Many of these loans are for a payment period of only 36 months. So, your monthly premium is higher and you'll end up paying more overall for the boat because of the added interest costs.
Marine Lenders
Marine lenders act as boat loan specialists and brokers to find you a loan. Typically those loans come from banks or other private sources.
The benefit of working through marine lender services is that you get to work with someone who understands the boating industry and the loan process for a boat better than anyone. Along with that, you can receive a liveaboard sailboat loan with the same rates as you would for another personal bank loan.
With a marine lender, you will still have to pay at least a 10% down payment, so you'll still need to have some cash on hand.
Is a Liveaboard Sailboat Loan Worth It?
If you have good credit and a solid plan for paying off a boat loan, then a loan might be the fastest way for you to get on the water with your new home.
On the other hand, if you don't have as good of credit, or you want to live as cheaply as possible while living on a sailboat, you probably want to consider saving up and paying for your new watery home with cash instead.
