The Core Difference
Marine mortgage and hire purchase (HP) both allow you to spread the cost of a boat purchase over time. The fundamental difference is who owns the vessel during the finance term.
- Hire Purchase: the finance company owns the vessel. You hire it with an option (and obligation) to purchase it at the end of the term. Ownership transfers when the final payment is made.
- Marine Mortgage: you own the vessel from day one. The lender takes a legal charge (mortgage) over the vessel as security. If you default, the lender can enforce the charge and sell the vessel - but you are the legal owner throughout the term.
Head-to-Head Comparison
| Feature | Hire Purchase (HP) | Marine Mortgage |
|---|---|---|
| Who owns the vessel? | Finance company (until final payment) | You, from day one |
| FCA regulation? | Yes (personal use) / No (business) | Usually yes (Part II CCA or MCOB) |
| LTV available | Up to 80–85% (new); 70–75% (used) | Up to 75–80% |
| Max term | 10–15 years | 15–25 years |
| Rates (indicative) | From 5.9% APR | From 6.2% APR |
| Balloon payment option | Yes - widely available | Rarely available |
| Charter use permitted? | Complex - requires lender consent | More straightforward |
| Part I MSA registration | Complicated by HP ownership | Straightforward - you own it |
| Early repayment | Rule of 78 or flat rebate may apply | Fixed ERC during fixed period |
| Survey requirement | Usually required (used vessels) | Required |
| Private sale during term | Must settle finance first; lender consent needed | Possible with lender consent |
When HP is the Better Choice
- You want the lowest possible monthly payment and a balloon option at the end of the term
- You are buying a new or near-new vessel from a reputable builder
- You are financing through a limited company for business use (unregulated HP is more flexibly structured)
- You want the protection of the Consumer Credit Act for a personal leisure purchase
- Speed is important - HP is typically quicker to arrange than a marine mortgage
When a Marine Mortgage is the Better Choice
- You plan to use the vessel for charter or commercially coded operations
- You want to register the vessel under Part I of the Merchant Shipping Act (required for many commercially coded vessels)
- You want a longer repayment term to reduce monthly payments (marine mortgages typically go to 20–25 years)
- You are buying an older or unusual vessel that HP lenders will not touch
- You want to refinance at a later date (marine mortgages are generally easier to refinance)
Tax Implications for Charter Use
If you are using the vessel for commercial charter, the finance structure affects VAT and income tax treatment:
- HP: VAT on each payment (if trading) is recoverable for a VAT-registered business, but the lender must consent to commercial use and the vessel must be properly coded
- Marine Mortgage: Interest is potentially deductible as a business expense if the vessel is used wholly for commercial purposes; capital allowances may also be available
Always take advice from a specialist marine accountant before structuring charter vessel finance - the interaction between VAT, income tax and capital allowances is complex.
FCA Regulation: What Changes Depending on Structure?
| Scenario | Regulated? | Consumer Protections |
|---|---|---|
| Individual, leisure HP | Yes (CCA 1974) | Section 75 protection; cooling off; right to terminate at 50% paid |
| Limited company HP | No | No CCA protection; commercial terms only |
| Individual, marine mortgage (MCOB) | Yes (MCOB rules) | MCOB suitability; FCA oversight; complaints to FOS |
| Business marine mortgage | Sometimes | Depends on structure; take legal advice |