Financing Your Houseboat

January 2022 Own By Heather Magda Serrano

Financing a houseboat can seem like a complicated process if you’ve never done it before. That’s why it’s always a good idea to consult an expert like Joey Gottfried, the regional manager of Newcoast Financial Services in Clearwater, Fla.

Joey’s been in the marine financing business for almost 30 years and he’s helped countless people to finance their dream houseboats. To give you a better idea of the process, here’s a sample phone conversation Joey had with Danny Kreishner who’s looking into financing a houseboat for his family of four for the first time:

Phone rings

[Joey]: Hello, this is Joey with Newcoast Financial, how can I help you?

[Danny]: Hello Joey, my name’s Danny, and my wife and I are looking into buying a houseboat. We’ve got two kids and it’s going to be our first houseboat. We’re wondering what the process is for financing this kind of boat.

[Joey]: Sure, let’s start with a couple questions for you. Have you settled on a houseboat? If not, can you give me an idea of maybe a price range you’re looking at?

[Danny]: We haven’t settled on a particular houseboat yet. We’re playing with the idea of either building one brand-new or maybe buying a used one. We know they are a lot of good used ones out there that are still really nice.

[Joey]: Yes, there are.

[Danny]: So we’re thinking our price range is around $350,000.

[Joey]: Okay, that makes sense. What state do you live in? We like to ask because it can impact the financing. Not all of the banks used in the marine lending industry lend in all 50 states, so we typically ask to make sure we’re quoting you correctly.

[Danny]: We live in Kentucky.

[Joey]: Okay, great. The financing options are very attractive right now. The rates that I’m going to quote you are some of the lowest we’ve ever seen. There have been a few times where the rates have been lower, but rates are within a quarter to a half percent of the lowest that the lending rates have ever been.

[Danny]: Oh, wow, that sounds great.

[Joey]: So the rate you would qualify for would depend on several factors. One of them is the loan amount. The other factors would be your credit score and the term.

[Danny]: How long are the terms usually?

[Joey]: The standard term is 20 years, but you do get a little bit of a rate discount at 15 years. Then after that it’s really going to be based heavily on your credit score. So, are your credit scores excellent?

[Danny]: Well, our credit scores are pretty high I think. Mine’s in the low 800s and my wife’s in the high 700s.

[Joey]: Okay, that’s fantastic. You’ll qualify for the best rates based on what you’re telling me. There’s one more really important question that could impact the financing: have you had other loans this size before? What’s the highest dollar amount loan that you’ve financed in the last 10 years?

[Danny]: Well, we bought our house and we had to finance that. That was a little over $350,000.

[Joey]: Alright, so you’ll be fine. I ask that question because when it comes to financing boats, they’re considered luxury loans and the banks want to make sure you’ve had other similar sized loans in the past. The fact that you’ve had a mortgage gives you the comparable credit history they’re looking for. Everything sounds great then.

Now onto fixed rates. I know the last couple of houseboat loans I’ve received in the last two weeks have had rates in the mid to high 4s on fixed rates. The 15-year term option is typically about a quarter percent less than the 20-year term. But I would figure a rate in the mid to high 4s, a term of 15 to 20 years, and with a standard down payment of 20 percent.

[Danny]: Those sound like pretty fair rates.

[Joey]: Yes. And I wanted to mention something to you. I know when you’re looking at advertisements and you’re seeing quoted rates and down payment requirements, you’ll see some lower rates quoted from marine lenders, including us. When I was at the Fort Lauderdale Boat Show, our rate sheet was 4.2 percent. That’s like the lowest rate available and the standard down payment is typically 15 percent.

The reason why rates and down payment requirements are a little higher on houseboats is because a houseboat is a custom boat. There is a difference in the financing of a custom boat versus if you were buying a 40-foot Sea Ray, which is more of a production boat.

[Danny]: Would it still be considered a custom boat if I’m buying second-hand?

[Joey]: Yes. I’ve financed hundreds of used houseboats over the years and they’re all pretty much considered custom. Anytime you get into custom boats, they charge a slightly higher interest rate and require a larger down payment. That’s always been the case. I’ve been doing this for 29 years and it’s always been like this from day one. That’s why we always quote 20 percent down instead of the normal 15 percent down.

[Danny]: Okay, I guess that makes sense. So if we’re going to buy a boat brand-new or buy a used one, what do you think would be a better value for our money? Do you think we should go with building our own boat exactly the way we want it or do you think we could find something just as good second-hand?

[Joey]: That’s the million-dollar question. Because the houseboat industry had that major setback between 2008 and 2014, there’s not been that many houseboats built. It’s becoming increasingly tough for people to find the boat that they want because there haven’t been that many made in the last 10 years.

[Danny]: Dang.

[Joey]: Obviously buying used is great and maybe over a period of time that could potentially be the better value, but you know what? At the same time, those boats aren’t getting any newer, and there are a lot of people who want new or late model used. I think when you have a 2020 houseboat five years from now and you’re trying to sell it, they’re going to be a lot of people that’ll prefer spending the extra money on it than they would on a 2003 houseboat that will then be over 20 years old. I can’t really say if one is a better value than another; it’s really just kind of what you want.

It sounds like you want something later model, something really clean, and there aren’t a lot of them out there. So you just have to decide what’s best for you and your family based on what you can find out there.

[Danny]: Okay, that sounds reasonable.

[Joey]: Just so you know, the financing is no different whether it’s new or used, so you don’t need to worry about how it impacts the financing because it doesn’t. It’ll just boil down to the loan amount.

[Danny]: Okay. Would we have to get pre-approved with a houseboat or do we choose our houseboat first, maybe start building it, and then get the financing in order?

[Joey]: That’s another great question that can be a little complicated. In the real estate industry people get pre-approved and it’s a really common thing. You get pre-approved for X amount of dollars then you go shopping.

In marine lending, it really doesn’t work that way. None of the marine lenders actually offer pre-approvals for a certain dollar amount and the reason they don’t is because they need to make sure that the collateral qualifies, that it’s not too old, and that it’s not maybe a make they’ve never heard of before. That’s why the banks typically won’t finance boat brands they’ve never hear of before because they can’t figure out the value on them.

[Danny]: Wow, I didn’t know that.

[Joey]: So getting back to your question, there are kind of two ways to approach it. One is that if you’re confident that you have the credit and the income and the liquidity to qualify, you wait until you find the boat and then you can qualify at that time.

Most people I would say want some sort of pre-approval. How you do it is that you apply for financing on a boat that you’re considering. Maybe it’s something you don’t have under contract yet, maybe you’re looking at three or four and you’re not sure which one, so you actually just apply for financing on a specific one that you’re considering, and you can use that as the pre-approval.

[Danny]: Oh, that makes sense.

[Joey]: We can get an approval on a boat that you’re considering, and maybe you even end up buying that boat and guess what? You already have the approval. Maybe you end up going with something different, in which case we just have to go back to the bank and ask them to update the approval they have on file. We give them the updated information on the boat, the make, the size, etc, and the contract (if you have one at that point). You’d also submit all the documents required for the approval, and then we just get the approval updated.

Doing it that way is kind of a way to secure a pre-approval, and yet it still gives you options to continue shopping.

[Danny]: Cool, I think we’d want to do that. Once we find the boat that’s in the right price range that could possibly be our future houseboat, how do we start the process of getting approval?

[Joey]: Once you lock in on a boat and maybe make an offer and the offer’s accepted, we have two separate lists we’d send you: one for you and one for you to send to the seller.

Your list would include basics like needing a copy of your driver’s license and proof of insurance. The list will also let you know we’re going to need a boat name and the mooring information.

Then on the seller’s side, their list lets them know we need a purchase agreement, a copy of the title, registration and basically whatever title documents they have that applies to the particular situation.

If there is maybe a lien on the boat – in other words, the seller has a loan on the boat and that loan needs to be paid off – we’d need to get a pay-off letter. For the most part, that’s about it.

[Danny]: Okay, that sounds good.

[Joey]: Back on your list as the buyer, you’d also have a survey requirement. That’s probably one of the most important things we’re going to need going forward. Then once we have the survey report and some of that information from the seller, we can start ordering the closing.

[Danny]: And how long does the process to get approved and close take usually?

[Joey]: If we receive a full and complete file from you when you apply (such as the application with attached terms, pay stubs, tax returns, W2s, bank statements, and that kind of thing), we can usually have an answer for you within two business days.

[Danny]: Wow, that’s pretty quick.

[Joey]: Occasionally there might be a document or two missing or the underwriter might have some questions for you in which case it could take an extra day or two. But oftentimes it seems to be two business days.

Then as far as the time it takes to close, once we have the survey and most of what we need from the seller, we can then order the closing and get the loan documents emailed over to you. Usually from that point of receiving the survey and that information, you close about a week later.

[Danny]: That sounds great.

[Joey]: It’s not uncommon for it to take longer, but that’s normally not a function of us as the lender. It’s usually getting the information from the seller or maybe some final negotiations are going on, or if there’s a broker involved then there’d be one other party involved in the process. Sometimes there are survey deficiencies and there’s some back-and-forth on how much of a credit the seller is willing to grant the buyer for the found deficiencies.

All of that drives the timeline, but once that’s cleared and we have all we need, we can usually close in about a week.

[Danny]: So once we get approved and everything, we’re not bound to follow through, right?

[Joey]: You’re not. You don’t even actually come out of pocket—I can’t speak for the seller and the survey—but as far as Newcoast Financial (the lender), we don’t charge you a penny until you actually sign the loan documents. You’re not committed to close. There’s no contract or anything like that. It would just be between you and the seller and the broker if one is involved.

[Danny]: Great. Well, I think we’re going to go ahead and shop for a houseboat. Will you send us those lists you were talking about?

[Joey]: Yeah, definitely. I’ll email you an application package, and like I said before, you can either wait, or if there’s a boat you’re considering and you think you’re going to close in the next 30 to 60 days, you can go ahead and apply using one of those boats to get somewhat of a pre-approval. The application forms I’ll send are simple fillable PDFs along with the list of financials we’ll need. Once we get that information back, we’ll get it submitted for approval.

[Danny]: Sounds perfect.

Joey Gottfried
Newcoast Financial Services
Recreation Lending, Inc.

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