If you love being on the water, purchasing a houseboat may be a dream come true. Like most real estate purchases, however, buying this type of home has its own challenges. Here are two you need to prepare to handle when pursuing your goal of living on a lake.
Only Unconventional Financing Available
Although a houseboat can qualify as a primary residence, it is considered a recreational vehicle by banks rather than a traditional home. This is because houseboats are mobile, capable of being moved to different locations at any time. Since they're not tethered to one location like regular houses, banks treat them like RVs, mobile homes, and similar types of relocatable housing.
Unfortunately, this means you won't qualify for a conventional home loan for your houseboat, even if you have perfect credit and a high income. Instead, you'll either have to apply for marine financing or loans specifically designed for recreational vehicles if you don't have the money to purchase the houseboat outright.
These loans typically have different terms than conventional mortgages. For instance, the standard term is 20 years for houseboat loans rather than the typical 30 years for standard homes with fixed-rate mortgages. Additionally, the interest rate you're charged may be higher due to the increased risk associated with the fact houseboats can be relocated at any time (thus making it harder to repossess the property if you fall behind on your payments).
To ensure you get the best deal, consider the various lending products available and select the one that suits your needs and financial profile.
You Need Boat Insurance Not Homeowner's
Another issue you'll need to contend with is the fact that you'll need boat insurance rather than homeowner's insurance. Homeowner's insurance policies are written only for houses stationed on land. While these policies do often provide coverage for boats, the amount may not be enough to completely cover the value of your houseboat. For instance, HO3 policies only cover boats under personal property and typically have a maximum payout limit of $1,500.
To ensure damage to your houseboat is completely covered, you'll need to get boating insurance. Even then, you'll need to choose between two policy types: Actual Cash Value and Agreed Amount Value. An Actual Cash Value is similar to auto insurance in that it will pay out the value of the houseboat minus any depreciation. Agreed Amount Value policies will pay out a predetermined amount you and the insurance company agreed on when you purchased the insurance.
It's best to discuss your insurance needs with a broker prior to shopping for a houseboat to ensure you understand all the factors that can affect your coverage.
For more information about purchasing a houseboat or help finding one for you, contact a local seller like Harbor Cottage Houseboats.