YACHT FINANCING FAQ
Frequently Asked Questions: Getting a Boat Loan
Here are some common questions, and some honest answers, on the process and terms of Yacht Financing.
To receive specific answer to any other yachting loan questions, visit the Yacht Loan Application Page. It is not a credit application, and your credit will not be checked without your permission.
Q: Will issues in the residential mortgage industry effect the marine side?
A: While the experts initially hoped the subprime mortgage mess would be contained to a small segment of the housing industry, concerns are now being raised in other segments of the economy about the potential fallout. What is undoubtedly occurring is a general tightening of access to credit.
It may become harder to purchase a house, yacht, or even get a credit card, due to higher standards for minimum credit scores in all areas. However, historically speaking it really has never been easier to get a loan for a boat for less.
Many marine lenders are very aggressively competing for good boat loans, and have positioned their competing rates, as such. The lending process is still relatively simple and easy. Getting a loan for a newer model yacht, in good condition is easier than almost anytime in history.
Q: What is a Credit Score?
A: Every individual has a credit score. This score reflects the level of risk associated with lending to that individual. Scores range from 400-800, with higher being better.
Negatively affecting your score are things such as late payments, judgments or collections, heavy use of credit, high ratio of actual credit to available credit, and inquiries into your credit. Credit score plays a significant role in determining your ability to get a loan of any kind (marine, residential, or even a credit card).
Q: How does a yacht appraiser determine a boat's value?
A: Most boat appraisals are determined by a licensed yacht surveyor. He computes a boat’s value a few different ways, 1) by analyzing other comparable vessels currently for sale, 2) by analyzing comparable boats that have recently sold, and 3) by integrating these numbers with the "book value", usually defined by NADA, or BUC.
While there is no clear science, the goal is to give the lending entity an understanding of the value of the boat, to ensure that they are not lending money on an asset that is grossly over-valued.
Q: What is an escrow account?
A: An escrow account is a safe place to keep your deposit. Typically your yacht broker will have a legal escrow account you can safely use. Escrow funds are released per written agreements, and Closing Statements, signed by both parties of a yacht transaction.
Q: How often do boat loan rates change?
A: Yacht loan rates don't necessarily change every day, but they can. These changes are based on a variety of factors, but mainly will correlate to changes in the bond market due to breaking financial news, world events, stock market movement, and sometimes supply and demand of marine loans.
Q: What is APR?
A: APR stands for annual percentage rate. APR is the effective rate you will pay on your boat loan based on the interest rate and related closing costs. It will almost always be higher than the interest rate on your loan, because it factors in your "cost to obtain the credit". However, it is important to know that your payment is based on your simple interest rate, not your APR.
Q: What are points?
A: A point is 1% of the boat loan amount, and is a cost associated with closing. If you have a $100,000 boat loan, a point is $1,000.
Q: What comprises my monthly boat loan payment?
A: Your monthly payment for your boat typically includes principle, and interest. It can also include insurance if your bank requires.
Q: What documents do I need for a yacht closing?
A: Banks require a variety of documents, including:
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