Financing Your Yacht: Minimizing Interest Expense

In today’s rising interest rate environment, buyers are understandably looking for different ways to minimize their interest expense.

With interest rates on the rise, many potential or current yacht owners may be concerned about how that may affect how they’ll finance their yachts. We got together with the Denison F&I department to make sense of it all.

In today’s rising interest rate environment, buyers are understandably looking for different ways to minimize their interest expense. Traditional fixed-rate loans typically carry a higher interest rate and capture the interest charge up front for the bank, due to the way they are structured. However, there are other types of loans that can be more beneficial to the borrower depending on how long they plan on keeping the loan. Since the typical boat owner keeps a loan for less than five years, it is worth a discussion of the different options available.

Traditional Loans: Fixed interest and payment for the full term of the loan. Interest is fully amortized and terms typically run anywhere from 10 to 20 years.

Interest-Only Loans: These are interest-only with no principal payment due. Interest rate is typically fixed for the first 3 or 5 years and then adjusts periodically for the balance of the term.

Adjustable-Rate Mortgages (ARMs): Fixed payment for the first 3, 5, or 7 years, then adjusting periodically for the remainder of the loan. Typically amortized over a 20-year period and include both principal and interest in the payment. 

Balloon Loans (10/30): This is a loan with a fixed payment for the first 10 years and a balloon payment due at the end of the 10-year term. The loan is amortized over a 30-year term and reduces the payment to about 1/2 of a fixed loan.

As you can see, there are various different ways that loans can be structured. Depending on your personal situation, one of these options may bring more financial sense to your purchase.

YACHT FINANCING & BOAT LOANS

Denison Financial Services offers an expert, in-house team specializing in Finance and Insurance. With over 30 years of experience, our finance team’s long-standing relationships with the best lenders can provide you the most competitive rates and flexible financing options.

For more information about financing your yacht or understanding current interest rates, email the finance team at Finance@DenisonYachting.com. To start your search in purchasing a new yacht, speak to a Denison yacht broker today.

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