Home equity line of credit for boat

[Cwuest34]

Is anyone familiar with these? I'm looking to purchase a used boat in the 2003-07 range. It seems like this is a better route to go vs a short boat loan. My local credit union only offered a 4yr boat loan.

Experiences?!?! Thanks

[97roughneck]

I just did a HELOC (home equity line of credit) but I did it to buy more rental property, not to purchase toys.

Having said that, I know that lots of people do this to purchase toys, it makes sense to the point that the interest is deductible on HELOC, whereas on consumer loans it is not.

I don't know if they're all structured like this or not, but on mine, there is only an interest payment due every month. It's up to me how much principle to pay and I like having that flexibility.

Also, it was a lot easier for me to qualify for a HELOC than it was for a 30 yr. mortgage on non-owner occupied real estate. The Great Recession really put the clamps on that particular type of loan.

Originally Posted by Cwuest34

Experiences?!?! Thanks

If you pay the HELOC off in a short time its a good idea.

Problem is.. many people don't and then they roll the HELOC into the first mtg. by refi'ing and end up paying for a car or boat for 30 years or more. There are many Millions of people that are paying for kids tennis shoes, tanks of gas, dinner at Applebee's, and vacations for 30+ years because they paid off their credit cards with the HELOC and then refi'd it into a new first mtg.


As long as you pay it off in a few years, its not a bad way to finance a used boat. Having the line of credit available is very tempting, more so than many people can resist.


Also, most, if not all, HELOCs have variable interest rates. If rates go up, your rate and payment goes up. They've been level for quite a long time but who knows about next year.

[Ferg85]

I keep a Line of Credit open. I have used it for Cars and Boats. Great tool with several advantages. Buying power when buying from a dealer, the interest is usually a tax deduction like your home mortgage interest, and convenience.

[GBS]

We've done it several times, and actually have a couple of HELOC's available to us (currently unused) if needed. Fixed interest rates through our credit union are unbelievably low, as compared to other loans. Add in the tax deduction, and it is as close to "free" use of someone else's money as you can get. Our financial advisor actually prefers the careful use of this over pulling money out of investments, as we only are reducing long term gains, rather than giving them up completely by pulling out money.

BUT - this is what in the old days would be a 2nd (or 3rd) mortgage. Meaning it is your house on the line if you don't pay, and they have to be completely paid off if you ever sell your house. So you can be in big doo-doo if you get over exuberant with the concept!

[Phil T]

Every summer my credit union has boat or RV loans for around 3%. Why risk anything attached to your house? In my cheap opinion, if you can't pay for a boat in 4 years, you can't afford it. Toys depreciate quite quickly, but a home appreciates (long term) with inflation or better.

[Catch 22]

You have had some good insight here so far. All I will add is that HELOC's can be a pro or con depending on your personal decision making and discipline .

First of all, is it to provide a source for more income???.......great.....choose wisely...

If it is for gratification and toys......think.... if you honestly can pay it back on regular intervals ....OK....

For so many, however......HELOC's are easily forgotten about and serve only to be a drain on equity.............another way of saying that you may end up way underwater on your home.....

Recent history calls eh????

[MN1965]

I don't like the idea of anything attached to my home. I wouldn't do it.

[grizzley]

[QUOTE=Phil T;4223482] Why risk anything attached to your house?

Originally Posted by MN1965

I don't like the idea of anything attached to my home. I wouldn't do it.

I'll third that!
Even though a lot of people use a home equity loan, I would never jeopardize my home to buy toys, never!

[WillowAce]

From an accountants perspective using a HELOC to purchase a boat isn't the worst idea. Yes, the interest is tax deductible. Also in today's lending environment the interest rate is attractive if you must finance. Somewhere around 4% tax deductible interest is a lot better than 6 - 7% nondeductible interest. The key is that the loan is fixed rate and you are both disciplined enough and have the disposable income to pay it off.

With-that-said, should you use your home to buy a boat? I will say this, as long as the return on your investment is higher if you keep the money where it is at than the interest on the loan use borrowed money. If the interest on the loan is greater than return on investments use your money. It makes no sense to use someone else's money if the weighted cost of capital is greater than your internal rate of return.