# Its hard to finance right now....



## john232 (Aug 18, 2003)

It was hard for me to finance a 200K loan with a cash down payment of 50K. My wife has alot less credit background than I do but still had a credit score of around the mid 600s,. My credit score was low 700s. told the Lender that I would be getting a 40K bonus in a month and between my wife and I we bring home over 6K a month and live in a one bedroom apartment and will have only one car payment of 300 a month after we sell are 3rd car. we had some mis- information on our credit report and supplied letters of dispute to the lender but they said to bad, we must get the descrepencies removed entirely from our credit report, and they all so said it would be better if we had a House or more assets. But My job forced us to travel around the country for many years so we never lived in a House long enough to obtain any serious equity. And since we moved back to Texas in 2001 we decided to rent a House untill our youngest Daughter was out of School (which was in the last part of 2006) Now we want to start our dream of getting a Norseman 447 and outfitting it for some serious cruising, and retiring from my job (since I have been there 32 years) and on top of that have I just turned 50, and the clock is ticking. Some People have said the Banks are tighting up since the Housing Market crunch and the rumors of recession are on the horizon, but who knows? The good news is that the Lender said if we do a few adjustments with our credit that we MAY get approved.


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## TSOJOURNER (Dec 16, 1999)

Get that **** fixed on your credit report. Doing that could help you save in different ways such as auto insurance. Freecreditreport.com can be used 1time per year at no charge. I did it, it's quite simple.
Banks are being much more careful these days, can you blame them? This isn't over yet with the sub-prime slime, and the they are right in the middle of this fiasco. 
"A smaller boat with a suitcase full of money beats a larger boat tied to the bank everytime."


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## TrueBlue (Oct 11, 2004)

I'm not qualified to provide financial advice, but even if financing is approved, if I were you, I'd be *very* reluctant to bury myself in debt for a quarter million. Especially for a deeply depreciating asset, no home equity and during this declining world economy.

Hell, my home's paid for, no car loans or credit card debt, all kids college loans paid for - and I'd still hang on to my money . . . at least until the dust settles.


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## witzgall (Jan 9, 2007)

John232;

I agree with TrueBlue. We don't know your entire financial picture, but unless you have, or will have another 250k in assets, you will quickly find yourself boat poor, unable too cruise, or even keep up on the mainainence and insurance of your boat. If you really want to cruise, then find something MUCH cheaper, and be happy with it.

When my wife and I first started shopping for a boat, we looked an much more expensive boats. First boat we visited, and even went sailing on? A 47' 139k asking price monohull.

What did we buy? a 32', 20k Westerly. To buy the bigger boat, we would have had to either sell our house, or use all of our liquid assets, + take out a loan. Now we have a boat we own outright, and are spending the money to get her up to snuff, without it breaking our bank. Have you checked out the prices for rigging on a 47' boat? Bottom paint? I got a quaote for insurance for that 47' boat - $3500 a year east coast only. Ours for the same cruising area is $1200.

If you have not done so already, pick up a copy of "The Cruising Life", by Jim Trefethen. Jim is Opinionated, and I don't agree with everythig he writes, but most of it is good advice.

http://www.amazon.com/Cruising-Life...bs_sr_1?ie=UTF8&s=books&qid=1203951301&sr=1-1

Chris


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## cardiacpaul (Jun 20, 2006)

Its not so much the credit report, or the history, its the fact that you're looking for a bank to hook up to 200k for what they "see" as a basically.... 'unsecured' loan. Yea, I know they can take the boat if you don't pay, same as they could a car, but they don't like having "assets". They like cash, and you can't turn a big dollar boat into cash easily.


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## camaraderie (May 22, 2002)

*and you can't turn a big dollar boat into cash easily.

*Tell me about it!!


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## SailorMitch (Nov 18, 2005)

cardiacpaul said:


> Its not so much the credit report, or the history, its the fact that you're looking for a bank to hook up to 200k for what they "see" as a basically.... 'unsecured' loan. Yea, I know they can take the boat if you don't pay, same as they could a car, but they don't like having "assets". They like cash, and you can't turn a big dollar boat into cash easily.


Just like the old joke goes -- they will gladly loan money to people who don't need it.


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## hellosailor (Apr 11, 2006)

There is no question that some banks have realized they are about to go bankrupt if they keep offering trash loans, but in the meantime you'll still find plenty who are trying to sell homes with zero down payment and the intent of creating more sub-prime trash loans.

Boats are something else, the folks who make boat loans are understandably more reluctant to get stuck with them but they are still in business only as long as they can LEND MONEY. So they are still lending--and eagerly lending--but they are looking twice at who they will lend to.

"Prime" Tier1 customers will have a credit index in the upper 700's, pushing 800. 600's won't cut it. 32 years on one job is great--but being near retirement, with potentionally zero income--runs against you. Moving around can be explained--assuming that's one employer showing 32 years--but again, they are going to look at everything, twice. Once your boat goes out of US waters, if you default it becomes very expensive to find and reposses the boat. And the lenders are also very much aware that some folks take boats out and default on them intentionally--with expensive repo fees to follow.
So, is it harder to get a loan? Yes and no. Harder if you are not Tier1, but those prime customers are still going to get it without arguments--at some of the lowest rates in a long time.
All things considered though, this is still an easy time to go broke and lose everything. Once the investigations and prosecutions and bankruptcies from the subprimes really start to snowball...things may get ugly at a lot of "financial institutions". And, for all of their customers.


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## john232 (Aug 18, 2003)

I plan on retiring with a yearly retirement income of 36K a year from my employer. My Wife and I will be living on the coast and working for another 3 or 4 years trying to pay the boat off early before we take off on our adventure. The Norseman 447 have done practically all the depreciating there going to do and are holding there value at 200K to 240K. Yea the smart thing to do is keep working for another 5 to 10 years hoping are health holds and hoping are dream is still obtainable, but usually most people don't make it and I was always told to go now while you are still young enough or it will never happen. I guess I could put 50K down on a Passport 40 at around 110K or a Passport 42 at around 130K and my monthly payment would go down to about 6 or 700 a month and if we live aboard and work for a few years we could about pay off the loan quicker. Like I said the clock is ticking.


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## sailingdog (Mar 19, 2006)

One other point... without a house or other significant assets tying you to the USA, a bank is going to look very hard at you, since if you leave US waters, you'll effectively have very little in the way of financial ties to the US, and leave the bank very little recourse in case of default. 

Most of those Tier1 customers are going to have assets the bank can go after in the USA, should they decide to default on the loan and take the boat to foreign ports. 

One idea is to get a smaller boat, and buy it for cash... and then leave sooner... do you really need a 44' boat??? You might want to also consider that as you get older, your ability to easily handle the weight and size of larger sails, equipment goes down. There is a significant difference between the sails, gear and costs on a 44' boat, compared to a 38' boat.


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## xort (Aug 4, 2006)

Use another lender.

I have been in touch with Trident Funding. They specialize in yacht loans.
My loan officer said the subprime mess has not affected boat loans. He has many sources to finance through. Some will not do older boats, some will not do livaboards, some will not do hurricane areas. But he has plenty of lenders who can and will finance. The rate is currently 6.25%.
Trident has offices in all the major boating areas. 888 fund 888.
Or call Robert Dunford directly at 203 944 6555.


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## sailortjk1 (Dec 20, 2005)

TrueBlue said:


> my home's paid for, no car loans or credit card debt, all kids college loans paid for -


Do you belive this guy?
Blue, what friking planet do you come from?


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## TrueBlue (Oct 11, 2004)

Just sold my boat for a nice juicy profit too . . .  

It just ain't right tj - I'm going crazy without seeing bills in my mailbox.


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## sailingdog (Mar 19, 2006)

TB-

If that's such a problem, I can send you an invoice to be paid at regular intervals...... 


TrueBlue said:


> Just sold my boat for a nice juicy profit too . . .
> 
> It just ain't right tj - I'm going crazy without seeing bills in my mailbox.


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## TrueBlue (Oct 11, 2004)

I'd love to oblige you SD - but can't see depriving you of that joy. Thanks anyway.

Actually, I can kiss the boat profit goodbye (and then some) when our daughter has her waterfront, Newport wedding this June.


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## christyleigh (Dec 17, 2001)

TrueBlue said:


> Actually, I can kiss the boat profit goodbye (and then some) when our daughter has her waterfront, Newport wedding this June.


Ahhh....... Lifestyles of the Rich and Infamous. Are you going to rent Jacky K's old place ?
As for the original posting..... I'm in the process of a re-fi at 5.99% through Essex. They, like the major boating catalogs with thier 'Boat Show Sales', have loans 'on sale' at Miami Boat Show Prices.


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## hellosailor (Apr 11, 2006)

Tblue-

"Actually, I can kiss the boat profit goodbye (and then some) when our daughter has her waterfront, Newport wedding this June."

If she has good teeth and hips, I can get you a good price for her, you won't have to spend a cent. And if she has a US passport, there's an extra $35,000 in it, right up front.

[vbg]


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## TrueBlue (Oct 11, 2004)

hs, PM me with that contact info . . . I'll supply the photos.


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## sailingdog (Mar 19, 2006)

Ahhh... the joys of fatherhood...  How many people does she have on the list now???


TrueBlue said:


> I'd love to oblige you SD - but can't see depriving you of that joy. Thanks anyway.
> 
> Actually, I can kiss the boat profit goodbye (and then some) when our daughter has her waterfront, Newport wedding this June.


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## TrueBlue (Oct 11, 2004)

Over 200 at last count. Please don't ask about the cost per plate  .


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## sailingdog (Mar 19, 2006)

LOL... I'm not that mean... 


TrueBlue said:


> Over 200 at last count. Please don't ask about the cost per plate  .


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## Stillraining (Jan 11, 2008)

*Thanks for the tip..Well guess now..Im just giving*

my three daughters 20k each and telling them to elope..figure I will save a ton of cash that way...


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## bestfriend (Sep 26, 2006)

Just my opinion. A 200k boat is going to put you at about $1100 a month in payments, after your down, for 20 years at 6.75. You can't get a loan that big for an older boat, without paying through the nose. Your retirement income will give you $3000 gross, so maybe $2000 net? Can you pay half your income into your boat? Will it be your only payment, will you have a house/apartment or car payment? If the boat payment is your only tie to land, then I say maybe. Personally, I would get nervous spending half of my income on a mortgage, boat or car. The banks would give it to you, or they used to before they screwed up, and thats why they screwed up. Try Trident Funding or Essex.

I started thinking along the same lines. I was looking at around 200k, I ended up buying at 60k. It was still way too expensive with my house and my son etc. So, now I will start over with something small and completely paid for until I retire. Then I will look for something bigger, but maybe 100k. There are lots of good old boats that are cruise tested and are much cheaper than the Norseman 447.


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## sailhog (Dec 11, 2006)

Bestfriend is thinking straight. Put $50,000 down on a $100,000 boat. Experience the joy of living without the anxiety of an extra $100,000 in debt. I'm not saying BF is "straight." I'm just saying that he's "thinking straight." There's a big difference.


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## sailingdog (Mar 19, 2006)

Chances are more than even that you'll just be out an additional $60,000 instead. 


Stillraining said:


> my three daughters 20k each and telling them to elope..figure I will save a ton of cash that way...


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## chris_gee (May 31, 2006)

John you may feel the clock is ticking, but the reason most don't go cruising is not because they die or their health fails.

Your chances of reaching 62 are 89.9%, according to official figures and since you are working most would put it at 95%. Keep slim fit and don't smoke and the chances are even better.

Turning 50 may make you sensitive about your age and reclining hairline, and indeed you may die tomorrow, however you are much more likely to live til you are 80. At that point or before while your boat may be worth the same in nominal terms, in real terms it will be worth about a quarter, while housing will have increased 200-300%, notwithstanding that it is likely to fall in the short term.

The go now brigade have a point. However it is simplistic. It is better to go at 60 rather than 70. The unmentioned part is coming back. For some at a young age they can re-establish themselves or establish themselves. Others are independent. Most older people are not, and in their seventies many will have difficulty living on a boat.

I suspect that your pension would cover your living expenses but not the 10% pa boat maintenance let alone any boat payments.

At a guess I would say living aboard and working it would take you at least ten years to pay off the boat and any upgrading. Then you might be able to cruise. A smaller boat sounds more within your means.


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## TSOJOURNER (Dec 16, 1999)

TrueBlue said:


> Over 200 at last count. Please don't ask about the cost per plate  .


TB,
Just did that in September. I still have dreams about what I could have put on the boat instead of that one day of partying! Ah but daughters really do know how to work the old man.


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## Stillraining (Jan 11, 2008)

*Good Point*



sailingdog said:


> Chances are more than even that you'll just be out an additional $60,000 instead.


OK maybe I'll make it 5k and keep my fingers crossed..

Lots of good advice ...All I can think of about my impending lack of retirement funding is once you quit working your are basically joining the ranks of the fixed income so buy accordingly... 36k is nothing to sneeze at and deserves a ,well done...but its still fixed..


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## ImASonOfaSailor (Jun 26, 2007)

I guess I still have time to buy my boat. Or maybe I should just bum rides off of people!


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## kreinestja (Mar 1, 2002)

*Assets*

John, as someone who has worked in the mortgage/lending industry for the past seven years; I have to tell you the part of your post that jumped out at me was the fact you were receiving a 40,000 bonus. I may be wrong but I am assuming that bonus is part of your 50,000 down payment? An underwriter would view that negatively. Good credit along with accumulating assets/savings is the viewed as extremely desirable. Even if you credit is mediocre, assets are such a strong compensating factor that it is often the deciding factor on loan approvals. 
The other deciding factor is ratios. Your debt versus your income determines ratios. I would ask your lender what your ratios need to be and from there you can figure out the exact loan size that would be deemed affordable for you.
If in fact you are using the 40,000 bonus as part as your down payment, you may want to deposit it in to your savings and let it season for a few months. If your down payment is coming from a nest egg that you have been growing for years, then disregard that suggestion.

Best regards,


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## Tspringer (Jan 11, 2008)

I find it very interesting and a bit disconcerting how people still think what is going on in the housing and mortgage industries is somehow limited to "subprime". Wake up call folks.... its FAR past just subprime lending. The conforming lending market is mired deep in a liquidity crisis and a large chunk of recent foreclosures are people who have credit scores over 700 but are choosing to walk away from their homes because they are a couple of hundred grand upside down. Lenders are calling it jingle mail..... mortgage holders go buy a cheaper home or rent and then mail the keys to the older home on which they owe more than it is now worth back to the lender.


Terry


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## kenhoneycutt (Dec 3, 2006)

*I bit the bullet*

And bought a new boat last September. I weighed everything that has been mentioned in this thread but the bottom line was in my case I had invested 20K in mutual funds about 15 yrs ago with the sole purpose of buying a sailboat when I retired (or when I was near retirement). I never even bothered to look at the statements until last year when I decided the time had come to start looking (I'm 58). Turned out the funds had done better than I thought and I had close to 85K to spend (the final cost of the boat was 175K) I still agonized over the decision to buy but here are some of the things I considered:

I have a somewhat limited number of years left that I will have the physical ability to continue to sail.

I don't have any other activities that I enjoy as much as sailing (golf is OK but it is getting expensive as well and the courses are always crowded here).

I don't plan on retiring for another 7 years so I have plenty of time to make payments and I still have 50K left from the Mfunds.

It is an activity my SO and I enjoy together.

I didn't have a problem with buying an older boat since I'm pretty handy (diesel mechanic in army and electrician / electrical engineer in civilian life) but I just don't have the time to spend repairing and upgrading - I'd rather be sailing - winters are long here and getting to the storage yard is a PITA.

Between my SS (if it's still around), Pension and 401K I'll have enough to retire comfortably and still make payments if I need to.

Other than our mortgage we have very few expenses and the loan was well within an acceptable debt load vs. income.

All that said and done - I had been planning on buying a sailboat like this since I got out of the service in 1971.

Bottom line is: weigh out all your options and be sure the decision you make is one you can live with or you'll never enjoy the boat if you're under constant worry about paying bills.


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## xort (Aug 4, 2006)

finance vs paying cash

Food for thought:
You can get a loan for just over 6%. You can easily make 4% on your money in a bank. You can take the tax deduction on the mortgage interest on the boat loan. Almost a wash, depending on your tax situation.
Holding some extra cash in the bank just in case is attractive if the financing is a wash.


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## orient (Jul 5, 2004)

Well said Ken. I did the same thing and my investments are making more than my 6% loan. Plus one never know when ones health will fail.


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## c2cSailor (Feb 17, 2002)

*Just to clarify a little..*



xort said:


> finance vs paying cash
> 
> Food for thought:
> You can get a loan for just over 6%. You can easily make 4% on your money in a bank. You can take the tax deduction on the mortgage interest on the boat loan. Almost a wash, depending on your tax situation.
> Holding some extra cash in the bank just in case is attractive if the financing is a wash.


In my part of the country New England, those "as low as 6.25%" loans advertised are only if you finance a minimum of 100k. You can take the tax deduction IF you itemize your taxes AND if the boat has means of living aboard (i.e. galley, head, and berth). Sorry to those open daysailor types.


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## Gramp34 (Oct 5, 2006)

I hate to say it, but look at it from the lender's point of view:

X walks into your office to ask for a loan.

X has worked for 32 years. His spouse works and they bring home $6K per month.

In all that time, X has accumulated liquid assets of $50K, of which $40K is a bonus next month. X apparently has no other assets to pledge against the loan.

X would like a loan of $150K to finance 75% of a used boat.

X wishes to retire early onto the boat, at which time his family income will drop to $3K per month. From this he will pay his taxes, living costs, marina fees, insurance, boat maintenance and the loan payment. 

He will have no fixed address and plans to sail off into the sunset while he is still young enough.

Just running some numbers:

$3000/ month gross ~ $2500 net

$150K amortized 10 years @ 6% is $1665.31 per month loan payment.

That leaves about $800 per month for living expenses, marina fees and maintenance. 5% of the boat's value for annual maintenance is $833 per month.

Does X's plan sound like a good risk to you?

There are a number of books out there on cruising that have sections dealing with financing. It doesn't sound like you've worked out a budget of what it will cost during your time cruising. If you have that, subtract it from your income and you'll have the amount left over for making payments. That'll give you an upper limit on how much boat you can afford.

As for counting on the Norseman not depreciating any more, I dunno. It's a buyer's market and with the debt issues out there I don't see that changing any time soon. Unless maintenance is meticulous (read: lots of money put into the boat over time) there just won't be many potential buyers for it. I expect as the aging baby boomers get older there will be lots of neglected boats out there and not many buyers keen on paying big bucks for fixer-uppers.

Good luck,

Tim


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## cardiacpaul (Jun 20, 2006)

_I expect as the aging baby boomers get older there will be lots of neglected boats out there and not many buyers keen on paying big bucks for fixer-uppers._

right, on both counts, the numbers of boats are going up and the pool of buyers is going down.
Not so much so far on the sail side, but the powerboat market (except for the million dollar buys) is in the tank.

example:
there are over 3700 powerboats just in florida from 31-40ft, up to 250k

583 sailboats.


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## k1vsk (Jul 16, 2001)

*financing vs cash*

I can't see how financing a depreciating asset can be anything but a loser. Even the tax deduction on interest only mitigates around 25% of the loss and still means you are paying close to 75% of the interest on a depreciating asset. Strictly from a fiancial perspective, this is the worst way to buy anything and one should recognize that before making such a decision. 
One just needs to look at the analogy of financing an automobile purchase. I recognize doing so is often a necessity and obviously, a car is often a necessity in and of itself but I think we all would agree that someone who can afford to pay for a car would never finance it for fiscal reasons unless the capital could grow elsewhere and do so at a higher rate than the loss incurred on the boat.
Financing a boat is purely an emotional decision.


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## hellosailor (Apr 11, 2006)

Ah, the magic of accounting, sometimes better known as "three card monte".

Actually, if you have as little as $20,000 and a good broker you can buy bonds or CD's paying out 8% now. Not easily--but they do come on the market, and they are reasonably secure. So you invest at 8, and finance the boat at 6.25, and you can still make money by financing even withough figuring tax positions.

Or course the math is much simpler if you do it Willie Sutton's Way: Take the money and run. (He's the one who was asked "Why do you rob banks?" and replied "Because that's where the money is.")


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## k1vsk (Jul 16, 2001)

hellosailor said:


> Ah, the magic of accounting, sometimes better known as "three card monte".
> 
> Actually, if you have as little as $20,000 and a good broker you can buy bonds or CD's paying out 8% now. Not easily--but they do come on the market, and they are reasonably secure. So you invest at 8, and finance the boat at 6.25, and you can still make money by financing even withough figuring tax positions.
> 
> Or course the math is much simpler if you do it Willie Sutton's Way: Take the money and run. (He's the one who was asked "Why do you rob banks?" and replied "Because that's where the money is.")


that ignores the loss by:
1. the depreciation on the boat, and
2. the likely bigger loss by not buying more of those 8% investments with the money you just spent on the boat.

Life is too short to consider the cost of money when buying any toy and especially a boat. If you need to, you shouldn't buy it in the first place.


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## Tspringer (Jan 11, 2008)

k1vsk said:


> I can't see how financing a depreciating asset can be anything but a loser. Even the tax deduction on interest only mitigates around 25% of the loss and still means you are paying close to 75% of the interest on a depreciating asset. Strictly from a fiancial perspective, this is the worst way to buy anything and one should recognize that before making such a decision.
> One just needs to look at the analogy of financing an automobile purchase. I recognize doing so is often a necessity and obviously, a car is often a necessity in and of itself but I think we all would agree that someone who can afford to pay for a car would never finance it for fiscal reasons unless the capital could grow elsewhere and do so at a higher rate than the loss incurred on the boat.
> Financing a boat is purely an emotional decision.


Let me give you an example of how it makes sense.

I am in the process of buying a boat. My plan was to pay cash. The boat is in the $150K range. I could simply pay cash, have no payment and be done with it and that was my initial plan.

But.... if I were to put $50K down and take a loan for $100K financed at 6.5% over 20 years my payment would be $745 per month. I can then take the $100K I was going to pay on the boat and instead purchase a $100K rental house which I can then rent out at $900 per month.

Now, I have rental income coming in over the amount of the boat payment AND though the boat will not appreciate, in the longer term the rental house will.

This is how boat loans make sense. But unless the purpose of the boat loan is simply to free capital so it can be put to better use, I see no purpose.

Terry


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## k1vsk (Jul 16, 2001)

Tspringer said:


> Let me give you an example of how it makes sense.
> 
> I am in the process of buying a boat. My plan was to pay cash. The boat is in the $150K range. I could simply pay cash, have no payment and be done with it and that was my initial plan.
> 
> ...


Terry
I certainly see your perspective but it only serve to rationalize the boat loan, not justify it.
To put it differently, if you were to pay cash for the rental house, your annual profit would be FAR greater than the annual profit made when you add the boat loan into the equation. The difference in net profit between the two is what your REAL cost is for the boat, not just the financed portion or, to look at it wholistically, your REAL cost is what you lost in profit by buying the boat.

People who typically finance a boat or other toy look at it in terms of monthly cost but taking the broader perspective over the life of any investment, the picture looks a lot different.

I guess I'm in the minority if the number of documented boats in my marina is any indication as they don't document them for world cruising...


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## sailingdog (Mar 19, 2006)

Gramp-

IMHO, you're being a bit generous on the numbers... taxes on $36,000 are probably a bit more than $500 a month, unless they're the proceeds from a tax free revenue source, like Roth IRA disbursements.


Gramp34 said:


> I hate to say it, but look at it from the lender's point of view:
> 
> X walks into your office to ask for a loan.
> 
> ...


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## Gramp34 (Oct 5, 2006)

Just another thought on Norsemen 447s not depreciating any more.

From the BUC used boat book:

Year	Average Retail Price Range	
1990	$198,000 $218,000 
1986	$160,000 $176,000 
1985	$149,500 $164,500 
1984	$143,000 $157,500 
1982	$130,000 $143,000 

These prices assume the boat has average equipment and is ready for sale without any work needed.

These prices are dropping on just about a straight line at $9100 per year.

Cheers,

Tim


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## dakuehn (Aug 21, 2006)

I am sticking to SD's advice and staying with a smaller boat


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## sailingdog (Mar 19, 2006)

Wise beyond your years... 



dakuehn said:


> I am sticking to SD's advice and staying with a smaller boat


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## hellosailor (Apr 11, 2006)

Gramp, don't let the numbers fool you. Those resale prices don't mean the value is dropping--unless they reflect boats purchased in the same model year for the same retail price.

I'd expect that boat prices went up during the 80's as oil prices and everything else went up. I'd also expect you're at least partly right--and that some of this is devaluation. Of course, a 1990 boat might not need new standing rigging, while a 1980 boat might, that's a question of "disposables" and maintenance as much as it is devaluation. Ditto for sails.

Raw numbers, can be hard to really read.


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## xort (Aug 4, 2006)

k1vsk said:


> that ignores the loss by:
> 1. the depreciation on the boat, and
> 2. the likely bigger loss by not buying more of those 8% investments with the money you just spent on the boat.
> 
> Life is too short to consider the cost of money when buying any toy and especially a boat. If you need to, you shouldn't buy it in the first place.


K
You are mixing two separate issues. One issue is if boats are good investments or not. They are not, they are an extravagance. But if you are going to buy an extravagance, why not pay for it in the most efficient way possible.

This assumes you have the full amount of cash on hand to pay for a hypothetical $150,000 boat. Put a reasonable minimum down and put the rest of these funds in a safe investment. You should be able to get 5% but perhaps more with a bit of research. So a loan of 6.25% is only costing you 1.25%. The tax writeoff can offset most of that 1.25%. The hidden benefit is that if you need extra money in an emergency, the $100,000 is there to use. You might pay a penalty for early withdrawl but in an emergency, that's the price to pay.


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## sailhog (Dec 11, 2006)

xort said:


> K
> You are mixing two separate issues. One issue is if boats are good investments or not. They are not, they are an extravagance. But if you are going to buy an extravagance, why not pay for it in the most efficient way possible.
> 
> This assumes you have the full amount of cash on hand to pay for a hypothetical $150,000 boat. Put a reasonable minimum down and put the rest of these funds in a safe investment. You should be able to get 5% but perhaps more with a bit of research. So a loan of 6.25% is only costing you 1.25%. The tax writeoff can offset most of that 1.25%. The hidden benefit is that if you need extra money in an emergency, the $100,000 is there to use. You might pay a penalty for early withdrawl but in an emergency, that's the price to pay.


Xort Entwhistle makes an excellent point. For a bass player in a rock-and-roll band, he really knows his finance.


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## k1vsk (Jul 16, 2001)

xort said:


> K
> You are mixing two separate issues. One issue is if boats are good investments or not. They are not, they are an extravagance. But if you are going to buy an extravagance, why not pay for it in the most efficient way possible.
> 
> This assumes you have the full amount of cash on hand to pay for a hypothetical $150,000 boat. Put a reasonable minimum down and put the rest of these funds in a safe investment. You should be able to get 5% but perhaps more with a bit of research. So a loan of 6.25% is only costing you 1.25%. The tax writeoff can offset most of that 1.25%. The hidden benefit is that if you need extra money in an emergency, the $100,000 is there to use. You might pay a penalty for early withdrawl but in an emergency, that's the price to pay.


I'm not really mixing up anything. We all know any boat isn't an investment in anything except enjoyment. Any logic that attempts to support financing a boat based solely on fiscal terms is indicative of the trend resulting in billions of dollars being financed every year by the got-to-have-it-now mentality by people without the means to buy it.I'm not making a value judgement about people who finance boats but rather just trying to reinforce the point that if you do so, don't be fooled into somehow thinking it won't cost you more compared with simply paying for it - it will always cost more to finance any depreciating asset, no matter how to parse it with other investments. when you don't add into the equation the value of the money being financed.


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## sailhog (Dec 11, 2006)

Xort is suggesting that you keep yourself liquid, and offset the finance charges by investment returns. The same person could buy the boat outright, but would not have the advantage of being liquid in the event of an emergency.


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## orient (Jul 5, 2004)

K1, I,m confused. If I decide to buy a boat for $200,000 and I pull the cash from my investment that has been paying 10%. I now own a boat but have lost $20,000/yr. If I take a 6% note it costs me much less than what the investment was making plus I get a tax deduction. Another consideration is if you take money from your ira and pay cash. Now you have to pay taxes on the withdrawal, approx 24%. Again, we are buying a boat for enjoyment, not as an asset.


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## k1vsk (Jul 16, 2001)

orient said:


> K1, I,m confused. If I decide to buy a boat for $200,000 and I pull the cash from my investment that has been paying 10%. I now own a boat but have lost $20,000/yr. If I take a 6% note it costs me much less than what the investment was making plus I get a tax deduction. Another consideration is if you take money from your ira and pay cash. Now you have to pay taxes on the withdrawal, approx 24%. Again, we are buying a boat for enjoyment, not as an asset.


In your example above, a $200k boat financed at 6.25% over 10 years equates to $29,000/year and will cost you in interest over that period almost $70,000. Must be a hell of an investment you are planning...

Your choice - do the numbers and make your choices!
Making sound financial decisions is not something anyone should do based on what I or anyone else says here and certainly must be personalized to specific circumstances. Some of the comments previously prompted me to write this caution and I am now regretting that decision.


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## xort (Aug 4, 2006)

k1
Don't regret it, we're just trying to get the most bang for the buck.


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## k1vsk (Jul 16, 2001)

xort said:


> k1
> Don't regret it, we're just trying to get the most bang for the buck.


Absolutely! As we all try.
If someone can prove me wrong, I'll quickly and gladly admit my mistake. I know everyone is well-intended but some of the comments previously made here (and what's worse, what some others apparently agree with from their comments) are patently wrong and I hate to see anyone blindly following bad advice.
If nothing else gets resolved here, note that if you are considering options with purchasing anything of substantial cost, don't do it without some sound advice.


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## xort (Aug 4, 2006)

I think you're referring to me, please explain how I'm wrong?

I'll simplify for the sake of discussion...

Loan is 6%; keeping the money in a bond is 6%. That seems to be a wash. You give the interest on one side and get it back on the other. Meantime you have the cash sitting in a bond as emergency back up money.
How do you come out better paying cash in full?


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## TrueBlue (Oct 11, 2004)

k1vsk said:


> If nothing else gets resolved here, note that if you are considering options with purchasing anything of substantial cost, don't do it without some sound advice.


This statement makes an assumption that one lacks the basic ability to use common sense, whenever borrowing large amounts of money for the purchase of floating objects with steeply depreciating value curves.

But then again, every boat owner here knows the uncontrollable force boats have had over our otherwise common ability to form rational judgements.


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## cardiacpaul (Jun 20, 2006)

and thats why I keep my nickels buried in a pickle jar in the back yard.


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## kenhoneycutt (Dec 3, 2006)

*The uncontrollable force boats have*

Thiat pretty much says it all - it is insanity to throw thousands upon thousands of dollars away for a depreciating asset with borrowed money - but what the heck - they don't put pockets in coffins for a reason. I figure I may die penniless and destitute but I had a hell of a good time getting there.


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## tweitz (Apr 5, 2007)

When you are taking advantage of that tax writeoff on the boat payment side, don't forget that the income you are expecting from that investment is itself taxable (unless it is from munis) and you don't end up keeping it all. I also am pretty dubious that you can get a reliable safe investment that will pay more than you have to pay on a boat loan. As soon as you move to some degree of risk in the investment, the entire transaction gets riskier.


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## orient (Jul 5, 2004)

Xort, I agree with you. My investments last year easily beat 6% so with a boat loan at 5.8% makes sense for me. Plus I always have the option to pay the note off. As long as I can deduct the boat interest I am ahead of the game. Also the investments are in a IRA so no taxes until I pull the money.


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## Cruisingdad (Jul 21, 2006)

*Boat Loans*



orient said:


> Xort, I agree with you. My investments last year easily beat 6% so with a boat loan at 5.8% makes sense for me. Plus I always have the option to pay the note off. As long as I can deduct the boat interest I am ahead of the game. Also the investments are in a IRA so no taxes until I pull the money.


In some cases, I am a proponent of a note. However, remember that the note is amortized. In essence, every payment you make for the first many years of the loan will almost ALL be interest since you pay your interest up front.

I could have paid cash for my boat but took out a note for liquidity, and some of the other reasons stated above. I do not think it is a bad option as long as it does not stress your finances and you have a lot of cash reserves.

I cannot remember the exacts, but in *general *to finance it is:

1) 6-12 months of cash for ALL expenses in the bank AFTER your 20% down, with you boat payment..
2) Very good credit rating. This would be in the 700s+
3) Minimum 15% with a 20% preference down. Some, if you have VERY good credit, etc, will do 10%... but that is generally tough. Do not plan on anything less than 20%. That is in your favor too since if times get tough, the broker gets 10% of your sell price - which only leaves 10% for depreciation.
4) up to 20 yr terms, generally, though I have heard of longer programs recently. I have never used beyond 20yrs.
5) Your max debt:income ration of about 38-40% with 35% being the preference - and this is WITH the boat loan added in. I have been told that some also add in slip & insurance.
6) A house is strongly preferred, especially if you are coastal. I was told the reason for this is so people do not get loans for boats (paying 20%), then take off for the sunset. I was told this is a real problem with sailboats - much more than motorboats.
7) They like to see previous boat/large boat ownership.
8) Survey amount at least what the boat loan will be - NOT what the selling price is. If there is a difference, in general, you will cough it up or have to walk away from the deal. That becomes a real issue on older boats where you will pay even more money out of pocket for a bristol boat because it very likely will NOT appraise as high as you just agreed upon. 
9) I think it is 2 years employment... cannot remember that one well since it was not an issue for me.
10) If you are self employed, as many of us are, you will likely be putting together both yours and your companies finacial data, along with 2 years tax returns and a PFS.
11) Generally, they do not do loans less than about 80k, with 100+ as the strong preference. 
12) Large total assett. I cannot give a figure on this, I guess it all varies depending upon the boat, but I would venture to say 2+ times what your boat loan is.

I agree with the OP that it is difficult to get a boat loan. I remember one broker's comments that you do not have to have a boat, you have to have a house (place to live). It does not take a lot for them to want to say no. I strongly urge going through a mortgage broker. You will very likely get the best rate that way. They also have more flexibility with some of the notes since they work with a variety of lenders. Many of the mortgage brokers for boats and RV's actually have a written or unwritten guarantee with the banks they sell the notes to that if the note defaults, the BROKER COMPANY BUYS IT BACK. That removes much of the liability on the banks and allows them more flexibility. In essense, much more so with a boat than a house, you have to convince your boat broker that you are good to your word.

Some that I have used in the past:

1) Essex. Big company. Ok rates. Not as personal in the interaction. 866-377-3948. Essex Credit: Boat Financing

I used Donna and have met her many times at many shows. You could ask for her. She is knowledgeable and nice.

2) 1st Commercial. Much smaller company and a lot more personal. They work with a lot of lenders are are fairly competitive. Their programs really vary depending on the boat. 1-800-553-4778. Ask for Mike in Florida.

3) Intercoastal Financial. Much like 1st commercial. They do a LOT of boat loans. I give them a great reccomendation. Quite personal and seem to have more flexibility than most others. They even do the USCG documentation for you. Like 1st Commercial, they have a personal guarantee on the boats. Ask for Gerald. 800-916-0065. Boat Loans, Boat Financing, Boat Refinancing and RV Financing

You are more than welcome to mention that I sent you over to any of these people.

- CD


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## labatt (Jul 31, 2006)

john232 said:


> I guess I could put 50K down on a Passport 40 at around 110K or a Passport 42 at around 130K


Good luck finding a Passport 40 in GOOD shape for $110K... Same thing for the 42... At those prices, there will be a LOT of refit (furler, standing and running rigging, deck issues, electronics, sails, etc.) We bought our Passport 40 for a lot more than that a year ago and still had to put over $30k of refit in. Yes, they are available for that price - just make sure you learn what the problems are and have a surveyor check for them very carefully.


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## labatt (Jul 31, 2006)

By the way - I'll look up my info from the lenders when we were looking at a Hallberg-Rassy 53. It based at $740k and we were looking to add about $50k of additional stuff and then add tax on top of that. We were looking at a 20% downpayment. We went through 3 different brokers and about 15 different lenders until one finally would write the loan. The terms were high - 7.75% interest (vs. 6.25% "advertised" on lots of people's sites). My business had to be a "co-signer". This is with a house and some assets (though not enough for the bank to love). You have to remember that with the sub-prime crisis banks are being VERY cautious. We ended up passing on the boat, and I'm concerned I won't be able to get a different loan next year.


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## bestfriend (Sep 26, 2006)

labatt said:


> Good luck finding a Passport 40 in GOOD shape for $110K... Same thing for the 42... At those prices, there will be a LOT of refit (furler, standing and running rigging, deck issues, electronics, sails, etc.) We bought our Passport 40 for a lot more than that a year ago and still had to put over $30k of refit in. Yes, they are available for that price - just make sure you learn what the problems are and have a surveyor check for them very carefully.


There are two here. One is $149 in good shape. One is $129 in fair shape, needs cosmetics. Both on the market for almost a year.


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## hellosailor (Apr 11, 2006)

When something has been on the market for a full year (house, boat, car, ANY thing) that usually means it is horribly overpriced for the condition it really is in. Or, there's something queer like a divroce going on, where the item is intentionally not being marketed so it won't be sold while it rots. 

"There are eight million stories in the naked city...."

And a few more involving boats that are in perfect condition, but just can't seem to get buyers. Ahuh.


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## sailusvi (May 3, 2005)

Some very good advise/opinions here. Because everyones situation is different, it is very hard to offer a general solution that suits all. 
If I have the cash available for a purchase, I pay cash.....period. The freedom I feel from not having a note is very hard to describe, I pray you all have a chance to feel it 

When I invest(real estate), I am blessed/fortunate/lucky with outstanding returns. That being said, if I were to buy my boat tomorrow, I would still pay cash for it.....


carry on


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## sailusvi (May 3, 2005)

thought this might be useful to someone....
http://http://www.boating-industry.com/output.cfm?id=1491859


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## Bermudahigh (Nov 17, 2007)

an extra http:// in your link.
http//www.boating-industry.com/output.cfm?id=1491859


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## xort (Aug 4, 2006)

sail & Berm
Neither link works. Can you post a new link?


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## sailingdog (Mar 19, 2006)

Try this: LINK


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## xort (Aug 4, 2006)

Dog...no go on that one either.


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## KODAD (Jan 9, 2008)

try this
New yacht finance entity formed


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## xort (Aug 4, 2006)

thanks kodad 
just what I need for my HR 53 financing


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## sailusvi (May 3, 2005)

sorry bout the bad link, KODAD fixed it


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## john232 (Aug 18, 2003)

OK!!!! I have decided to put 30 to 40K down on a 80K to 120K sailboat, this way I would only have to finance 40 to 60K on a twenty year note which should be pretty reasonable. I saw a Mason 43 for 120K the other day in Soundings publication, and I have also seen some Passports and Baba 40s in the range I am looking for, I also kind of like the NY 40s that are for sale on the East Coast they are running around 75K. I would even settle for a CYS 44 or simular boat for that matter. My plan as of know is to take the 40K bonus plus the 17K I will get after taxes and penalties from another PSP that I have had from another division of the Company I am retiring from and put that together with another 10K from my wifes PSP which should give me a total of about 50K after taxes on some of the untaxed lump sum payment from the 40K. I think I have a VERY good chance to be hired at Valiant Yachts in Texas as A Cabinet maker, I have a interview next week. 
My Wife will continue to work (and myself also) for another year and a half - to two years saving as much as we can to add to our nest egg. And by that time I will have all are cars paid off and we already have NO credit card debt. We have already bought 5 grand worth of Scuba gear and being a wood worker I have a storage rental place full of Teak, Spanish Cedar, mahogany, Cyprus, Ash, White oak, and Bubinga, which are all awsome Tropical woods that I will use to build extra Cabinets,replace cabin soles, cockpit sole Grating Ect.. ect... While I am at Valiant I will try to learn about systems, electrical, Diesel engines and what ever else I can learn to improve our self reliance while out Cruising. I am already Very Mechanically skilled In alot of things and also worked for a Military Aerospace Company for a couple of years in the late 80s learning and practicing Composite Fabrication on HH Dolfin U.S. Coast Guard Helecoptors and Attack Choppers. I learned Vacume bagging Fiberglass, Kevlar, and Graphite materials, doing lay-ups and mold making. So I think that most of my Skills fit right in to the boating life and can save me and earn me lots of money if and when I choose to use them. By the time we buy the Boat We should have NO bills except are one bedroom Apartment and utilities. God willing, I sure hope this works. and I am open to more of your EXCELLENT ADVICE. And thanks for all the great advise I have allready recieved from you all.


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## TSOJOURNER (Dec 16, 1999)

You can't afford the boat. You don't have enough money in the bank to deal with whatever could come up in the way of emergency repairs. If you go into debt for that amount at your age, to buy something that depreciates, you will live out your years in poverty. No ifs, Ands or Buts. The only thing that could save you would be a lottery win.

Take your 50K and spend 35 on a boat with a solid hull. Something around 33to 35 feet. Start refitting her while you are working. Spend the next 3 or 4 years cruising locally, improving the boat and saving money. When you have saved three times as much money as you think you'll need - then you can go.

I can almost guarantee you that after you have owned a 35 foot boat for a year, you will understand what type of income you need to manage a 47 footer, and you'll be glad that your bank didn't approve you in the first place.


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## xort (Aug 4, 2006)

Cruising fairly cheaply seems to run about $25,000/year, give or take. This doesn't include health insurance.
How do you come up with that while cruising? 

Working part of the year? If you work 3 months you'd need to find a job that will pay $400/day (60 work days in a 3 month period), after taxes.

Live off savings? You could earn 6% on your savings and spend 3%, letting the other 3% cover inflation. You need about $900,000 (900,000 X 6% = 54,000; half for living and half for inflation).

If you have pension, great. You can factor that into the equasion. What about health insurance?


This thread was about boat financing. Latest numbers I received was 5.75% for 20 years on loans over 100,000.


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## buckeyesailor (Mar 9, 2008)

After reading all of this I have come to the conclusion that I can afford a 20' Mac and stay in my home waters.....(southern Ohio).....oh well, it's still sailing, eh?


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## hardalee22 (Nov 3, 2006)

Sailormann said:


> You can't afford the boat. You don't have enough money in the bank to deal with whatever could come up in the way of emergency repairs. If you go into debt for that amount at your age, to buy something that depreciates, you will live out your years in poverty. No ifs, Ands or Buts. The only thing that could save you would be a lottery win.
> 
> Take your 50K and spend 35 on a boat with a solid hull. Something around 33to 35 feet. Start refitting her while you are working. Spend the next 3 or 4 years cruising locally, improving the boat and saving money. When you have saved three times as much money as you think you'll need - then you can go.
> 
> I can almost guarantee you that after you have owned a 35 foot boat for a year, you will understand what type of income you need to manage a 47 footer, and you'll be glad that your bank didn't approve you in the first place.


If everyone waited to save three times as much money as they thought they would need, no one would be out cruising.

I agree with the 33 to 35 ft part, but I say save a small chunk of money and go. Life is too short. I just watched a healthy 41 year old friend of mine catch a crazy strain of pneumonia and die 2 weeks later. Luckily he spent his life traveling the world and not overly stressing about money, but it's amazing how quick it can all end.


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## Cruisingdad (Jul 21, 2006)

john232 said:


> OK!!!! I have decided to put 30 to 40K down on a 80K to 120K sailboat, this way I would only have to finance 40 to 60K on a twenty year note which should be pretty reasonable. I saw a Mason 43 for 120K the other day in Soundings publication, and I have also seen some Passports and Baba 40s in the range I am looking for, I also kind of like the NY 40s that are for sale on the East Coast they are running around 75K. I would even settle for a CYS 44 or simular boat for that matter. My plan as of know is to take the 40K bonus plus the 17K I will get after taxes and penalties from another PSP that I have had from another division of the Company I am retiring from and put that together with another 10K from my wifes PSP which should give me a total of about 50K after taxes on some of the untaxed lump sum payment from the 40K. I think I have a VERY good chance to be hired at Valiant Yachts in Texas as A Cabinet maker, I have a interview next week.
> My Wife will continue to work (and myself also) for another year and a half - to two years saving as much as we can to add to our nest egg. And by that time I will have all are cars paid off and we already have NO credit card debt. We have already bought 5 grand worth of Scuba gear and being a wood worker I have a storage rental place full of Teak, Spanish Cedar, mahogany, Cyprus, Ash, White oak, and Bubinga, which are all awsome Tropical woods that I will use to build extra Cabinets,replace cabin soles, cockpit sole Grating Ect.. ect... While I am at Valiant I will try to learn about systems, electrical, Diesel engines and what ever else I can learn to improve our self reliance while out Cruising. I am already Very Mechanically skilled In alot of things and also worked for a Military Aerospace Company for a couple of years in the late 80s learning and practicing Composite Fabrication on HH Dolfin U.S. Coast Guard Helecoptors and Attack Choppers. I learned Vacume bagging Fiberglass, Kevlar, and Graphite materials, doing lay-ups and mold making. So I think that most of my Skills fit right in to the boating life and can save me and earn me lots of money if and when I choose to use them. By the time we buy the Boat We should have NO bills except are one bedroom Apartment and utilities. God willing, I sure hope this works. and I am open to more of your EXCELLENT ADVICE. And thanks for all the great advise I have allready recieved from you all.


You should come by and say hello to me. I am on C dock - and look off my bow at where they lay up the hulls for Valiant. Dad is right beside me. I can give you advice on many of these things.

Good luck on the Valiant interview. I know most of those folks very well. PM or let me know if you want to meet.

- CD


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