Even though a houseboat can be a real and physical home, the lending system works differently for houses that float.
You generally can't get a mortgage for a houseboat. This is because banks and lenders categorize houseboats as boats and not houses due to the risks and depreciation that accompany them. However, you can get a boat loan for a houseboat and achieve the same effect.
In this article, we'll cover the basics of houseboat lending and why banks treat houses and boats differently. We'll also explain your options for houseboat lending, how rates differ, and how to find a lender for your next houseboat purchase.
We sourced the information used for this article from houseboat dealerships and financial guides. We also researched interest rates for mortgages and boat loans to make example calculations.
Is a Houseboat Considered a Home?
A houseboat may or may not be considered a home or house. It depends on who you ask and why you're asking. Let's use the 4th amendment search and seizure laws as an example. Houseboats, while legally where you live, are still boats.
Therefore, the Coast Guard can board you whenever they want (and literally for no reason) and search through everything. That's not at all like a house on the land, which can't be entered and searched without a warrant.
The government, however, sometimes considers houseboats to be houses. For example, you can park a houseboat in front of a mailbox and consider it your mailing address. If it's on land, the coast guard can't board it either because it's outside of their jurisdiction.
A houseboat parked on a piece of private property could be considered a mobile home (or just a home) and would likely receive full search and seizure protections. But on a public waterway, the rules are different.
But what about banks? This is when it begins to get tricky, as every bank and lender is different. A houseboat is almost never considered a home, and therefore can't get a 'mortgage' per se. Here's why.
Why Houseboats Aren't Considered Houses by Banks
A houseboat is two things: a house and a boat. But what you do on it (live and sleep) matter less to banks than what it actually is: a boat.
A houseboat is, above all, something that floats and carries registration tags. Different rules apply to vehicles, and banks treat boats as a much riskier loan than houses.
Houses basically never move. Additionally, they're attached to a piece of permanent property that has value and never goes away. Houses also tend to appreciate, while houseboats tend to depreciate.
You can't sink a house, but if a houseboat sinks, all of the investment is gone. Whereas even if a house gets trashed, the land underneath is still worth something. These are all reasons why banks treat houseboats as vehicle loans and not home loans.
Can You Finance a Houseboat?
So, now that we've established that you usually can't get a mortgage for a houseboat, it's time to explore the options that do exist. Thankfully, you can certainly finance part or all of a houseboat purchase. You're not likely to get the favorable terms that are possible with a mortgage, but people with good credit history can get fairly reasonable rates.
Houseboat financing is treated the same way sailboat or powerboat financing is, though sometimes lenders assign different rates based on the cost and risk level of the craft involved. Houseboats depreciate rapidly, so this often affects them negatively. But houseboat owners tend to pay more reliably, which can affect them positively.
Virtually any bank that issues standard loans will consider lending for a houseboat. Some banks have a policy against lending for 'recreational' vehicles, but your good credit and a conversation with a loan officer could get you a deal anyway.
The primary obstacle you need to overcome is the perception that houseboats are a risky investment. Due to depreciation, banks can't easily cover lost revenue if a buyer stops paying. Collateral helps swing the pendulum in your favor, along with a decent-sized down payment.
Do Houseboat Dealerships Offer Loans?
Yes, many large and small houseboat dealerships offer loans. These are businesses that sell assets worth many hundreds of thousands of dollars, so a competent finance department is an essential aspect of their business.
Dealerships usually make deals with local banks to finance and manage the loans, and they call ahead to get you approved before offering you rates. When you negotiate, you can sometimes get rates reduced from the dealership's end.
How Much Money Can You Borrow for a Houseboat?
The amount of money you can borrow for a houseboat depends on factors such as the economy, your credit history, and your income. Sometimes, you can borrow just about any amount of money for a houseboat, provided that the bank believes you have the means to pay it off.
The typical loan amount for a houseboat ranges from $50,000 to $150,000. This doesn't include a down payment, as a large down payment is often required to get favorable rates in the loan. Additionally, some people pay off the majority of the boat upfront, or however much they can, as it reduces rates and costs down the line.
How Long is the Average Houseboat Loan Term?
Car loans are typically four to seven years in length, while mortgages are usually 10, 15, or 30 years in length. So, where do houseboats fall on this spectrum? Generally, a houseboat loan is on the high end of the scale at 15 to 20 years. From this perspective, it looks quite similar to a mortgage.
Obviously, it's better to shorten the loan term if possible. Longer houseboat loans usually aren't advisable to you or the bank, as a boat can fall apart in 30 years if poorly maintained. A loan term of 15 years seems to be the sweet spot, as the depreciation mostly occurs in the first couple of years, then gradually over the following decades.
What are Houseboat Loan Rates?
Houseboat loan rates are generally much less favorable than mortgage rates. This is due in part to the risk, and it's also because of the shorter terms usually chosen by houseboat borrowers. A decent rate for a houseboat would be about 4.29% over 15 years.
The best houseboat loan rates are usually about double what you'd get approved for on the house. For example, if you get a houseboat loan at 5%, an equivalent mortgage could cost you somewhere between 3% and 3.95%.
And although this cost difference can be pretty insignificant on a month-to-month basis over a long period of time, it adds up a lot if you calculate the total difference in price.
Let's do a quick example to put the rate into perspective by comparing a houseboat and a house that come with the same $200,000 price tag. Assume you get approved for a 4.29% 20-year loan for the houseboat.
You'll eventually end up paying an additional $8,580 by the maturity date of the loan. That's an extra $35.75 per month for interest on top of the principal loan amount.
Now let's look at the house. For the same price, your bank approves a home mortgage at 2.95% over the same period: 20 years. Over the lifetime of the loan, you'll pay $5,900 in interest—$2,680 less than the houseboat.
Your monthly interest payments on the house work out to around $11.17, which is roughly a third of your monthly interest on the houseboat. So with a mortgage, you save $24.49 per month compared to a houseboat loan.
A monthly cost of an additional $24 is an insignificant difference for most people who can afford a $200,000 houseboat. But it's still important to keep in mind that it adds up and that loans always cost you more than the original price of the item.
Are Houseboat Loans Worth It?
Houseboat loans are worth it if you're honestly committed to living aboard or using your houseboat for the length of the loan and beyond. It's never a good strategy to get a massive houseboat loan just to sell the boat a year or two later.
This is because the depreciation may exceed total interest payments. That means it'll cost you more to sell the boat than the loan cost to get it. Loans are complex and require care and planning, plus a commitment to preserve your financial good-standing.
But if you're committed and convinced you'll get good use out of the boat, then a houseboat loan is definitely justified. It can help you own something that can make life much more fulfilling for you, your family, and your friends—and the long-term costs can certainly be worth it.
