After a house purchase, buying a good quality narrowboat will be, for many, probably the next most expensive item they will ever buy and financial help may be needed to help fund the acquisition.
We are licensed credit brokers and are here to help advise you on your needs. Please do not hesitate to contact us for guidance.
If you do need finance it will considerably help the buying process if you can get from your lender, approval in principle to your suitability for a loan before you start looking at boats for sale. It will also help fix your price budget.
The two main methods of getting finance on a boat purchase are:-
There are a number of banks and finance companies who have a speciality in this area.
Very briefly, a marine mortgage will be granted, subject to your financial status, typically up to a maximum of 80% of the purchase price, at an interest rate of about 3 percentage points higher than a house mortgage, with a repayment period of around 10 years. This may be extended by a couple of years if you are going to permanently live aboard. You will normally have to find at least a 20% cash deposit. The loan company will require you to pay for a full, out of water survey & independent valuation and they will need to approve, and be party to, your comprehensive insurance cover. The loan will normally be secured on the vessel and you will not be able to sell it during the loan period without the company’s consent.
We are agents for Collidge & Partners who, working with The Royal Bank of Scotland Group, are one of the foremost marine mortgage and insurance specialists.
Additional House Mortgage
The cheapest means of raising finance can be by taking out an additional mortgage on your house, or that of a very kind relative. If there is sufficient equity (the difference between what the house is worth and the total of any outstanding mortgage loan) then a further loan can be got at the much cheaper housing mortgage interest rate and, very importantly but depending on your age, can be repaid over a much longer period, up to 25 years or more, making the monthly repayments more affordable. You can also get 100% of the purchase price plus the costs of the boat survey etc provided there is enough equity. The mortgage company will not be bothered about what you are spending the money on and will not be involved in approving the boat survey or insurance cover or consenting to any subsequent sale.
Other Sources of Finance.
There are of course other sources of finance such as a personal loan from your bank. They can be at lower rates than a marine mortgage but are normally restricted to much lower levels of loan and to even shorter repayment periods. These may be appropriate to you, particularly if you already have the majority of the purchase price and are only seeking an extra few thousand pounds to add to it.
“I can’t afford a house so I’m buying a boat to live on as it is so very much cheaper.”
We have to say this is, unfortunately, not always such a clear-cut case. To illustrate the point take the following two very approximate examples. The finance rates used and deposit requirements shown may become quickly outdated but the point of the examples still hold good:-
1. House mortgage. Suppose a very modest 1-bedroomed flat is available at £100,000 which can be mortgaged for 90% of purchase price at, say, 7% pa interest rate over 25 years.
Capital & interest basis repayments will be c. £645 per month plus initial deposit of £10,000
2. Boat mortgage. Let us say you can buy a new-ish boat in nice condition, suitably large enough and equipped for living aboard, for £50,000 and which can be ‘marine’ mortgaged for 80% of cost at, say, 10% pa interest rate over 10 years.
Capital & interest basis repayments will be c. £545 per month plus initial deposit of £10,000
So you see, whilst you will have paid for your boat long before you would have cleared a mortgage on a house, in terms of the level of monthly repayments, it is not necessarily the tremendously cheap alternative that some people believe it to be. Of course you may find a compromise in buying a cheaper, much older, smaller boat, possibly in less than good condition and if, for work purposes, you need to live in a high property value area then the cost of a flat will be very much higher (but don’t forget a residential mooring in such a location is likely to be very much more expensive too eg. up to £8,000 pa in London & that’s before community charge etc!).
Little Venice – The Mayfair of the Canals!
You should also bear in mind that houses, over time & despite the occasional ‘hiccup’, have always increased in value whereas boats can only depreciate. When you have paid the final instalment for your boat it will be worth very much less than what you first paid for it.
See also our ‘Living Aboard’ & ‘Costs in Use’ pages
If you really do want to, or have to, live aboard then don’t let any of this put you off; we just wanted to point out that it may well not be as cheap as you first thought. Consider carefully all the pro’s and con’s, work out your finances very thoroughly and seek advice from professionals (like us!).