Weird financing request

[Icewindblue]

Hello all, I'm in the process of financing an offshore aluminum boat. My bank has offered me a really good rate, but they have had some odd requests, like requesting a survey on a brand new boat, and not understanding the trade in the deal, but we've managed to get around them so far.

The latest, however, is to insist on a "Registered Chattel mortgage over sailboat," payable to the bank, "to protect the bank's interest," in place for the life of the loan. I fully intend to have this boat fully insured on my own, but payable to me to cover the usual theft, damage, fire, sinking, etc.

Has anyone heard of such a thing? Are they out to lunch? Are they trying to avoid financing this loan at a low rate? I am also afraid that an insurance company will refuse to have double coverage on a boat - ie have to pay out twice if it is a write off in some way. Also, if I have to pay for double coverage, it will largely erase any benefit of the low rate.

 

[zurk]

yep. its usually given if you have bad credit. do you have bad credit ? if so, you probably wont get it otherwise.
if you have good credit tell them to pound sand.
also, dont finance boats. boats are toys. always pay cash for toys.

 

[Pineapple Express]

I'm curious why you think a survey on a new boat is an "odd request"???

 

[Aces]

Banks usually don’t like lending money against a depreciating asset

 

[ab1752]

You should 100% get a survey done on a brand new boat, no question. Many tales of guys taking delivery and find out the hard way. Rigging a boat is not the same as dealer pdi on a car. Just takes one clown who forgot the sikkaflex on the shelf installing a through hull to underscore that issue then you're in a dog fight between insurance and the dealer.

 

[beemer]

It is common for banks to request that expensive boats or yachts be registered (not licensed) . They essentially create a mortgage on the boat , so if other companies (eg marinas , boat repair etc) make a claim against the vessel the bank will be first in line to recoup their losses. registering is a one time fee , with renewals every 5 years. in the event of a write off situation you are on the hook for the full amount of the loan nothing more , nothing less.

https://www.tc.gc.ca/en/services/marine/vessel-licensing-registration/canadian-register-vessels.html

 

[Icewindblue]

Apologies. I should have taken the time to be more clear in my statement - should have taken more time to wake up before posting! What my true issue was is that they are insisting on the following:
"Insurance coverage - Loss payable to (major CDN bank) to protect the bank’s interest both in and out of the water, to be maintained over the boat for the life of this loan." I read this to mean that they want a separate policy with them as the beneficiary. I am worried that this would cost more money, and interfere with a policy that I would place on the boat in the usual fashion to cover theft, fire, log strike, etc. Am I reading this right?

Or is this part of the policy I would have on the boat, rather than a separate one?

As for a survey, it was always my impression there that surveys were for a used boat, to ensure due diligence on a worn (to different degrees) and perhaps neglected boat. Interesting idea to have it done on a new one. I'll have to think about that. My dealer, of course, thought the idea of a survey on a new boat was crazy...

 

[Pineapple Express]

Apologies. I should have taken the time to be more clear in my statement - should have taken more time to wake up before posting! What my true issue was is that they are insisting on the following:
"Insurance coverage - Loss payable to (major CDN bank) to protect the bank’s interest both in and out of the water, to be maintained over the boat for the life of this loan." I read this to mean that they want a separate policy with them as the beneficiary. I am worried that this would cost more money, and interfere with a policy that I would place on the boat in the usual fashion to cover theft, fire, log strike, etc. Am I reading this right?

Or is this part of the policy I would have on the boat, rather than a separate one?

As for a survey, it was always my impression there that surveys were for a used boat, to ensure due diligence on a worn (to different degrees) and perhaps neglected boat. Interesting idea to have it done on a new one. I'll have to think about that. My dealer, of course, thought the idea of a survey on a new boat was crazy...

That sounds like my homeowner insurance where the mortgage company is named on the insurance policy.

One way to avoid this issue would be to take out a Homeowner Line of Credit to fund the boat purchase. Then you can carry whatever insurance you're comfortable with.

Your dealer's comment about the pre-purchase survey tells you a lot, eh!?

 

[Foxsea]

Re: financing - Get a HELOC
And get a survey, regardless.
Then licencing (contrasted to registration) and insurance are routine.
Keep in mind that new boats depreciate very rapidly. Why not find a good, used boat?

 

[gunnerlove]

As much as I hate to encourage it... Second mortgages work well for large purchases. The repayment schedule is usually more restrictive however the rates will usually be better and unlike a HELOC you will be forced to pay down the debt.

 

[Gong Show]

They are requiring a 'binder letter'.
If there is an insurable loss, they want any insurance payout first.
If the insurance payout is greater than the amount of the loan at the time of payout, you will get the remainder.
This is required for any secured lending facility.
I see nothing wrong with their request.

As noted above, get a survey. It will protect your interests vis a vis the builder, insurance and lender.