When you complete the documentation necessary to register your boat with the United States Coast Guard, you may be able to finance the vessel with a preferred ship mortgage. Much like the mortgage on your house, this allows you to make payments on your boat, which can make it a more achievable option for many people. Whether your boat is for leisure or is how you make a living, it’s best to know what you’re getting into before you opt for a mortgage. This article provides all the information you need to know.
What is a Preferred Ship Mortgage?
For use under the United States Ship’s Mortgage Act of 1920, a preferred ship mortgage is recorded for a specific vessel and is superior to any other liens on the watercraft. Like buying a house or car, the owner works with a lender, usually a bank, to secure the funds for the boat. Then, the owner makes a payment each month, with interest, until the load is paid back. Remember, that you must have your boat registered with the United States Coast Guard to be eligible for a preferred ship mortgage. State documentation isn’t enough to secure a loan in this way.
Financing a Boat
The process of securing a mortgage for your boat is much like when you purchase a car, truck, or SUV. Based on the cost of the vessel, you’ll secure the money for a certain term, then pay it back monthly with interest. Because boats cost more than a car, the length of the loan is likely to be longer. Your credit score, the terms of the loan, the amount of your down payment, and the type of loan you choose all play a role in the length of the loan and monthly payments. In general, a credit score of at least 700 gives you the best odds of getting a boat loan. The average interest rate hovers between four and five percent.
When is a Mortgage Necessary?
If you cannot pay cash for a boat, then a loan is an alternative. The average boat loan lasts for 8 to 12 years and can help you purchase a vessel if you otherwise couldn’t afford to. Some people mortgage a boat for leisure activities, while others do so to obtain a boat for their livelihood, such as tour guides or commercial fishermen.
Maritime Lien Status
A preferred ship mortgage has a maritime lien status. This plays a role in how you are able to secure a loan for the boat. The lien protects the lender, should the owner of the boat stop making payments toward the mortgage. The preferred ship mortgage takes precedence over any other kind of lien on the boat and will be the first to get funds.
A preferred ship mortgage is a good idea for anyone who can get a loan and make the required payments on it. It’s a nice alternative to coming up with the cash to pay for a boat all at once. If you need help documenting your boat with the United States Coast Guard so you can secure a loan, US Vessel Documentation Online has all that you need.
