Houseboats In California

Houseboat Loans: A Complete Financing Guide

Victoria Araj6-minute read

November 29, 2022

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Recently, houseboats have risen in popularity for several reasons, from the ability to live more affordably in a big city to the strong sense of community they provide. If you’ve considered the appeal of the marine lifestyle, you may have noticed that financing such a move is a very different process than traditional home buying.

Although Rocket Mortgage® doesn’t offer houseboat financing, we’re committed to helping you achieve your financial goals – including those that float. In this article, we’ll explore the basics of houseboats, the types of financing available and what you should know before setting sail.

Boat Mortgage Overview

Although they sound the same, floating homes and houseboats are actually very different. While floating homes are full homes placed on a floating foundation, houseboats are mobile. Because of this, floating homes are typically more spacious and expensive, while houseboats are smaller and more affordable. This often means the upfront costs of a houseboat are much cheaper than floating homes, but there are additional expenses houseboat owners must consider – including moorage fees, fuel costs and sewage pumping.

Houseboats also cost more for insurance and taxes. Owners often pay up to three times as much for insurance compared with traditional homeowners and sales tax is much higher on the vessel, depending on local and state laws.

Due to their permanence, floating homes sometimes qualify for more traditional types of mortgages – but the process of financing a houseboat is often more complicated.

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Houseboat Loans Vs. Floating Home Loans Vs. Traditional Mortgages

So, can you get a mortgage for a houseboat? The answer is often no. Floating homes can be considered permanent residences and therefore qualify for specific mortgages – such as a floating home loan – which often come with similar terms as traditional home loans.

Unfortunately, houseboats don’t qualify for this type of traditional financing, but a potential boat owner can use a houseboat loan as an alternative to a mortgage loan. Just keep in mind that boat financing is often harder to find, requiring higher down payments and stricter loan terms.

Houseboat Financing Options

While houseboat-specific loans can be hard to come by – don’t fret! The good news is that several other forms of financing can be used toward marine living, and many are both accessible and affordable.

Which form of financing is right for you will ultimately depend on your individual goals, financial background and the amount of financing you need, but we suggest considering the following options.

Traditional Lenders

Although Rocket Mortgage does not offer boat loans, certain types of lenders like banks, credit unions and other online lenders will, especially if you already have an account with them. Whether you qualify for these loans will depend on your location on top of your financial background. For example, some lenders offer boat loans, but only to those who live in the states where they have branches.

Qualifications for watercraft loans will depend on the individual bank or lender, although most require a minimum credit score of 700 or higher, depending on the size of the vessel.

Home Equity Line Of Credit

Current homeowners have the option of taking out a home equity line of credit (HELOC) to purchase their houseboat. HELOCs are a type of second mortgage that allows property owners to access the equity they have built in their homes.

Once approved, the equity is received as a line of credit, which the borrower can continuously borrow against up to a certain limit and within a certain time frame. HELOCs are a popular alternative for recreational vehicle or auto loans, especially for homeowners who don’t want to refinance their mortgage or rack up large credit card debts.

Qualifying for a HELOC can prove challenging for borrowers with anything less than excellent credit, as most lenders require strong credit profiles for approval. Unlike a first mortgage, when most lenders target credit scores of 620 or higher, HELOCs typically require a credit score above 700. Rocket Mortgage does not offer HELOCs.

Personal Loans

Personal loans can be a particularly helpful form of financing as they can be used for whatever the borrower wants. Still, it’s important to remember that flexibility comes at a price, as most personal loans are unsecured and therefore come with higher interest rates.

Unsecured loans also require borrowers to have excellent credit scores to qualify. Those with bad credit would be more likely to be approved for secured personal loans, which come with lower interest rates but require some collateral to back the loan, such as real estate, cars or savings accounts.

Marine Loan Brokers

Marine loan brokers work for financial service companies and function very similarly to real estate agents. With this option, your buyer’s broker works with a seller’s broker to help you negotiate and organize the financing.

This is certainly an appealing choice for first-time boat buyers, as having an expert at your disposal often eases anxiety and simplifies the process overall. But of course, you’ll pay for this expertise – marine lenders typically charge a fee of 10% or more of the purchase price – and these loans also require a significant down payment of 10 – 20%.

How To Get A Loan For A Houseboat

Now that you understand the types of houseboat financing on the market, it’s time to begin your search. Apart from finding your dream houseboat, you should also create a plan before applying for a loan.

We recommend using the following steps as a guide when deciding which loan type is right for you!

Check Your Credit Score

As mentioned previously, the exact credit score needed for loan approval will depend on the individual lender and the type of financing you’re pursuing. Even so, many lenders require good to excellent credit. To prepare for the approval process, we recommend checking your credit score before taking any other steps toward financing.

Save For Your Down Payment

The exact amount needed for your down payment will depend on the size of the houseboat, your financial history and the type of loan you’re considering. However, most forms of financing will require a significant down payment, averaging around 20% of the purchase price.

Gather Asset Information

Most houseboat loans are considered portfolio loans, which often come with stricter requirements. This means that although your credit score is important for loan approval, your assets are also crucial, as most lenders will pay particularly close attention to the liquidity and history of your other financial assets to gain an understanding of your overall financial situation.

When submitting your loan application, you should be prepared with asset information your lender will need, including having important documents on hand like bank statements, retirement account balances and pay stubs.

Determine Loan Limits

Loan limits vary widely between lenders, and of course, the specific type of loan will also play a significant role in this piece of the puzzle. For example, personal loans often come with a maximum of $100,000, which is extremely unlikely to cover a houseboat purchase. Boat loan limits vary even more significantly, with some lenders offering $5,000 to $100,000 and others offering up to $5 million for the right borrower.

Consider Houseboat Loan Rates

Most houseboat loans come with fixed rates, meaning the monthly payments will remain the same throughout the duration of the life of the loan. Traditional boat loans can offer APRs as low as 4.29%, although this number is likely to be higher based on the loan amount and repayment term.

If you’re considering financing with adjustable rates, the exact payment you’ll make monthly will fluctuate with the market – so although your payments could decrease with time, they could also increase. To avoid surprises and protect your financial future, be sure to consider all the pros and cons of your loan rates before making commitments.

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The Bottom Line: Houseboats Are As Unique As Their Financing

Whether due to financial restrictions or simply a longing to live a unique lifestyle, more and more first-time home buyers are opting for non-traditional types of housing – from tiny homes to renovated trailers. If you’re looking for a way to combine your wanderlust with a love of the water, living on a houseboat could be the perfect option.

Yet, these alternative residences come with some significant challenges, as getting financing for non-traditional homes is never simple. As always, there are many approaches to homeownership. We recommend considering buying a lake house if you’re looking for a simpler path to owning waterfront property.

Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.