OnBoard Magazine - Issue XI - Summer 2019

WHAT TO EXPECT WHEN SEEKING PRE-APPROVAL Just as you would get pre-qualified before shopping for a new home, it is best to be prepared with a budget before you fall in love with a boat that may be out of reach. Since boats are considered a luxury and not a necessity, financing for these discretionary purchases falls under much higher scrutiny with more regulations than purchasing an auto, or even a home. Financing is complex. There are many variables that are used to determine rate, term and amount financed. Here are some general guidelines: Terms – The length of the loan. This varies and is based upon the amount borrowed and age of vessel. Options – Most lenders require 20% down. There are options for less down when you are dealing with a lower loan amount (usually under $75,000) or when purchasing a new boat. Rates – Rates also depend on multiple factors • Your median FICO score (middle value fromall 3 credit bureaus) • The amount borrowed as a Loan to Value (LTV) ratio (i.e. 70%, 80%, 90%) • The age of vessel. Boats are charged rate “Premiums” (increases) if they are over a certain age. This can be as early as 10 years, but the average age is 15 years before we see surcharges. WHAT BANKS LOOK FOR: Debt to Income (DTI) and Payment to Income (PTI) • Generally, debt to income less than 40%. Example: If monthly gross income is $10,000, then debt service payments should be less than $4,000 including the new boat payment. • Payment to income under 15%. Example: if monthly gross income is $10,000, then the boat payment should not exceed $1,500. • Liquidity Requirements—for loans above $150,000 • Banks want to see liquid assets equal to 6-18 months of debt service, depending on credit, DTI, PTI. Example: If debt service equals $4,000 per month, then a lender would like to see $24,000-$72,000 in liquid assets. WHAT LENDERS LOOK FOR IN THE BOAT: Age of Vessel • Most lenders prefer to finance vessels less than 15 years of age. • Vessels over 15 years of age are subject to rate premiums. Although some lenders will charge rate premiums if a vessel exceeds 10 or even 8 years of age. • Any vessel over 20 years old is financed on an exception-only basis and may incur additional scrutiny to the borrowers credit profile and financial standing to reach approval. What is Considered “Over-Powered” • Generally, more than three motors may be considered “over- powered” and some banks will not finance boats with four or more engines. This financing preference holds true for speed THE INS & OUTS OF BOAT FINANCING Getting Comfortable B luewater's in-house financing services, headed up by industry pro Vera Sohovich, further elevate the sales experience for customers on both sides of the transaction. Vera has many years of experience in marine financing and has countless connections and relationships with lenders to back it up. She and the Bluewater team enjoy working through each customer’s unique needs and wishes to gain the financing that works best for them. To these ends, we have developed a helpful roadmap to better explain the financing process and options available for Bluewater customers seeking a loan for their next vessel. 46 BLUEWATER