Yacht Financing ($100-$250k)
7 Steps to Financing a Yacht: Your Ultimate Guide
Owning a yacht is a dream for many, symbolizing luxury, freedom, and adventure on the open seas. However, financing a yacht can be a complex process. To help you navigate this journey, we’ve outlined seven essential steps to secure the yacht of your dreams.
1. Determine Your Budget
Before diving into the yacht financing process, it’s crucial to establish a realistic budget. Consider all associated costs, including the yacht’s purchase price, maintenance, insurance, mooring fees, and crew expenses. This will give you a clear picture of your financial commitment and help you decide on the loan amount you need from a consumer lending company.
2. Check Your Credit Score
Your credit score plays a significant role in securing favorable financing terms. Lenders use this score to assess your creditworthiness. Obtain a copy of your credit report and check for any errors or issues that could impact your score. Improving your credit score before applying for a loan can result in better interest rates and loan conditions. IMPORTANT: Generally scores under 680 will not qualify for loans over $100,000. If your score is below a 680 you may be asked to show 1 year of reserves, this is an account equal to or greater than the sum of one years payments.
3. Obtain a Survey from a Licensed Surveyor
Not all surveyors are created equal, our preference is a Sam Certified, independent, third party surveyor. In most cases the survey will cost $27-$35 per foot of boat, in other words a 30 foot boat would cost anywhere from $810-$1050. This is crucial to determining the true value of the boat, and exposing and manufacturer’s defects along with any inoperative or defective equipment.
**Banks will require a 3rd party survey to proceed with any used boat loan over $100k. New boats do not apply in most cases
4. Gather Necessary Documentation
Prepare all required documents before applying for a yacht loan. Common documents include proof of income, tax returns, bank statements, and details about the yacht you intend to purchase. Having these documents ready will streamline the application process and demonstrate your preparedness to lenders.
** If you are self employed, select lenders will require a “payment reserve”. This comes in the form of a bank account statement with the sum of 12 payments available in cash". Bonds or stocks cannot be used for this.
5. Explore Financing Options
Most marine lending brokers will forward applicants to 3 select lenders that fit the criterium of the applicant, but it is important to understand the unique guidelines of each lender. Not all lending programs fit the needs of an applicant. For instance: if you are planning on a transatlantic voyage, there are some banks that will allow this and others that prohibit such use of a vessel. State your intentions before you proceed with your broker.
6. Begin Application Process
Obtaining pre-approval from a consumer lending company can give you a competitive edge when negotiating the purchase of your yacht. Pre-approval indicates that you are a serious buyer with secured financing, making sellers more likely to consider your offer favorably.
7. Sign Closing Docs and Secure Insurance
Documents are sent in one of two ways depending on the lender, the options are Docusign or traditional pen and paper. Although the closing can sometimes be executed electronically, take note that only 3 states accept electronic signatures for registration. Once executed closing documentation is submitted to the lender, funding takes place approximately 4-8 business days.
Conclusion
Financing a yacht is a significant financial commitment, but with careful planning and the right consumer lending company, it’s an achievable dream. By following these seven steps, you’ll be well on your way to enjoying the luxury and freedom of yacht ownership.
For personalized yacht financing solutions, Float Finance is here to help. Contact us today to learn more about our competitive loan options and expert guidance tailored to your needs.