Why Refinance a Yacht?
Yacht refinancing - taking a new loan to replace an existing one - serves two distinct purposes in the UK marine finance market: rate reduction and equity release.
Rate reduction
If you took out marine HP or a marine mortgage when rates were higher than they are today, refinancing can reduce your monthly payments and total interest cost. The saving must be weighed against any early repayment charges on the existing agreement and arrangement fees on the new one.
Equity release
If your vessel has increased in value since you purchased it - or if you have paid down the original loan significantly - you may have built up equity that can be released as cash. This cash can be used to fund a refit, acquire a second vessel, or meet other financial needs. The new loan is larger than the outstanding balance on the original, and the difference is paid to you.
How Lenders Assess Refinance Applications
Refinancing a yacht is assessed in largely the same way as a new purchase, with some additional considerations:
- Current survey: the lender will require a recent condition and valuation survey - typically not more than 3 months old. The surveyed value is the basis for LTV calculation.
- Existing finance position: the lender will want to see the settlement figure on any existing HP or marine mortgage. This confirms there are no undisclosed charges on the vessel.
- Vessel age: older vessels attract lower LTV limits (see below) and some lenders will not refinance vessels beyond a certain age.
- Reason for refinance: lenders are generally comfortable with rate reduction and refit funding as purposes. Debt consolidation (using marine equity to repay unsecured debt) is viewed less favourably and may require more explanation.
- Affordability: income evidence is required in the same way as for a new purchase.
LTV Limits on Older Vessels
| Vessel Age | Typical Max LTV | Notes |
|---|---|---|
| 0–5 years | 80% | New/near-new; most lenders willing |
| 5–10 years | 70–75% | Standard refinance market |
| 10–20 years | 60–65% | Fewer lenders; strong survey required |
| 20–30 years | 50–60% | Specialist lenders only; GRP or steel hull preferred |
| 30+ years | 50% or lower | Very limited market; classic vessels may attract better treatment |
Classic and heritage vessels (traditional wooden yachts, Bristol Channel Pilot Cutters, etc.) may be assessed individually by specialist lenders who understand their market - in some cases attracting better LTV than a similarly aged fibreglass production yacht.
Worked Example: £250,000 Yacht - Release £50,000 for Refit
2011 Oyster 54 - Equity Release for Cockpit and Rigging Refit
| Current surveyed vessel value | £250,000 |
|---|---|
| Existing HP balance (original 10yr HP taken 2019) | £80,000 |
| Early repayment charge on existing HP | £1,200 (flat) |
| Equity in vessel (£250k – £80k) | £170,000 |
| New marine mortgage (65% LTV) | £162,500 |
| Settle existing HP (inc. ERC) | £81,200 |
| Net cash released for refit | £81,300 |
| Lender | Shawbrook Bank |
| New rate | 6.5% fixed for 5 years |
| Term | 12 years |
| New monthly payment | approx. £1,537 |
| Previous HP payment (remaining term 3 years) | approx. £2,490/month |
In this example the borrower released over £80,000 - more than the £50,000 initially required - while also reducing their monthly payment substantially by extending the term. The refit was funded and the net monthly outgoing fell by £953.
Early Repayment Charges: What to Watch
Before proceeding with a refinance, always obtain a formal settlement figure from your existing lender and check whether an early repayment charge applies:
- HP agreements: may use the Rule of 78 (which front-loads interest, making early settlement expensive in the first half of the term) or a flat-rate ERC. Request a full settlement figure.
- Marine mortgages: typically carry a fixed ERC during any fixed-rate period (e.g. 2–5% of the outstanding balance in year 1, reducing each year). After the fixed period, no ERC usually applies.
- Variable-rate agreements: generally no ERC, but rates may have risen since drawdown, making the refinancing benefit smaller.