Yes, you can mortgage a boat. Larger vessels are financed through a federal instrument called a Preferred Ship Mortgage, which functions much like a home mortgage but is governed by federal maritime law rather than state property law. To qualify, the boat generally must measure at least five net tons and be federally documented with the U.S. Coast Guard. Smaller boats that fall below that threshold can still be financed, but through a state-level security agreement that doesn’t carry the same federal protections.
Which Boats Qualify
Federal law draws a firm line. Under 46 U.S.C. § 31322, a mortgage counts as “preferred” only when it covers a vessel that holds — or has a pending application for — a Certificate of Documentation from the Coast Guard.1Office of the Law Revision Counsel. 46 USC 31322 – Preferred Mortgages Documented vessels must measure at least five net tons, a threshold that roughly corresponds to boats over 25 feet in length.2United States Coast Guard. The Requirement of a Certificate of Documentation
Smaller boats that stay registered at the state level don’t use this framework. Financing for those vessels typically relies on a standard security agreement under Article 9 of the Uniform Commercial Code, filed with the appropriate state office.3Cornell University Legal Information Institute. UCC Article 9 – Secured Transactions Those state filings don’t carry the same lien priority a federal mortgage provides, which is one reason lenders on higher-value boats insist on federal documentation.
One more boundary worth knowing: a Certificate of Documentation can only be issued to a vessel wholly owned by U.S. citizens.4eCFR. 46 CFR Part 67 Subpart C – Citizenship Requirements for Vessel Documentation For an individual, that means being a native-born, naturalized, or derivative citizen. Corporations and partnerships face additional rules about citizen ownership and control.
What Lenders Look For
Marine mortgage lenders evaluate you much like a home lender would, though the specific benchmarks differ. Expect a down payment of 10 to 20 percent of the purchase price, with higher down payments often unlocking better rates. Loan terms on larger boats generally run 10 to 20 years, and some lenders stretch further on high-value vessels.
Interest rates on boat loans tend to run higher than traditional home mortgages. As of late 2025, average boat loan rates hovered near 9 percent, though borrowers with excellent credit could find starting rates in the 6 to 7 percent range from specialized marine lenders. Credit score is the single biggest factor. Most lenders look for a minimum around 680, and scores above 700 open the door to better terms. Lenders also weigh your debt-to-income ratio and often require a marine survey before final approval.
What Goes Into the Mortgage Instrument
Federal law spells out what the mortgage document itself must contain before the Coast Guard will accept it. It must identify the vessel, state the full name and address of every party, and specify the total amount of debt secured (excluding interest, expenses, and fees).5Office of the Law Revision Counsel. 46 USC 31321 – Filing, Recording, and Discharge It must also describe the interest being mortgaged and be signed and acknowledged before a notary or other authorized official.6eCFR. 46 CFR Part 67 – Documentation of Vessels
Two numbers identify the vessel. The Official Number is a six- or seven-digit number the Coast Guard assigns when the boat is first documented, and it stays with the vessel permanently. The Hull Identification Number is a manufacturer-assigned code similar to a car’s VIN, permanently affixed to the hull.7National Vessel Documentation Center. NVDC FAQ Definitions and Abbreviations
Recording the Mortgage
Once completed and notarized, the mortgage must be filed with the National Vessel Documentation Center (NVDC) in Falling Waters, West Virginia. Submissions can go by mail or through the NVDC’s website.8eCFR. 46 CFR Part 67 – Documentation of Vessels – Section 67.218 Filing is not optional. A mortgage that isn’t recorded with the NVDC is not valid against third parties who don’t already know about it.5Office of the Law Revision Counsel. 46 USC 31321 – Filing, Recording, and Discharge
The NVDC charges $4 per page to record mortgages and related instruments.9United States Coast Guard. National Vessel Documentation Center Table of Fees Submitting without full payment gets the paperwork returned unrecorded. Processing often takes several weeks depending on the backlog. When the center accepts the filing, you get back a recorded copy stamped with the exact date and time. That timestamp establishes the lien’s legal priority against any future claims on the vessel.
What You Owe After Closing
Keeping the Documentation Current
Your Certificate of Documentation isn’t permanent. It requires annual renewal at $26 per year for either commercial or recreational vessels, and recreational owners can prepay for multiple years at the same annual rate.9United States Coast Guard. National Vessel Documentation Center Table of Fees Letting the documentation lapse becomes a serious problem when a mortgage is outstanding. Your certificate becomes invalid if you fail to renew it, fail to maintain the required hull markings, or transfer ownership to a non-citizen. If the vessel is under mortgage, the certificate cannot be exchanged or reissued without the lender’s written consent.6eCFR. 46 CFR Part 67 – Documentation of Vessels
Insurance
Lenders on marine mortgages typically require hull insurance covering physical damage from collisions, storms, and other perils. Many also require protection and indemnity coverage for liability to others. The lender is usually named as a loss payee on the hull policy, giving them the right to receive insurance proceeds if the boat is damaged or destroyed. Letting coverage lapse generally counts as a default under the loan agreement.
Can You Deduct the Interest
A boat with sleeping, cooking, and toilet facilities can qualify as a “second home” for purposes of the federal mortgage interest deduction.10Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction If your vessel meets those requirements, you can deduct the interest you pay on the marine mortgage just as you would on a home loan. The boat can serve as your main home or your second home, but not both if you already claim two residences.
The Tax Cuts and Jobs Act capped deductible mortgage debt at $750,000 ($375,000 if married filing separately) for loans taken out after December 15, 2017.10Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction Those provisions were scheduled to expire after 2025, which would raise the limit back to $1 million ($500,000 if filing separately) for the 2026 tax year. Check IRS.gov for the most current guidance, since Congress may modify these thresholds through new legislation.
What Happens if You Default
A recorded Preferred Ship Mortgage gives the lender strong enforcement tools under federal maritime law. On default of any loan term, the lender can bring a civil action directly against the vessel itself, known as an in rem action, in a United States district court. District courts have exclusive jurisdiction over these cases, so state courts cannot hear them.11Office of the Law Revision Counsel. 46 USC 31325 – Preferred Mortgage Liens and Enforcement
In an in rem action, the court can order federal marshals to physically seize the vessel to prevent it from leaving the area. The lender can also pursue you personally in a separate action for the outstanding debt or any deficiency remaining after sale.11Office of the Law Revision Counsel. 46 USC 31325 – Preferred Mortgage Liens and Enforcement Federal law does not require the lender to give you a specific cure period before filing suit. The right to enforce arises on default of any term.
When a court orders a sale to enforce a preferred mortgage lien, every existing claim on the vessel is wiped out and the boat is sold free of all liens. Proceeds go first to court costs and fees, then to any preferred maritime liens such as crew wages or salvage claims, and then to the mortgage lender.12Office of the Law Revision Counsel. 46 USC 31326 – Court Sales to Enforce Preferred Mortgage Liens and Maritime Liens and Priority of Claims The mortgage lender collects ahead of nearly every other creditor.
Releasing the Mortgage After Payoff
Once you’ve paid off the marine mortgage, the lien doesn’t clear from the record on its own. The lender must execute a formal Satisfaction of Mortgage document and submit it to the NVDC for recording.13United States Coast Guard. NVDC Exchange, Reinstatement or Return to Documentation The satisfaction must be properly notarized, and the NVDC returns a recorded copy as confirmation. Until that step is completed, the mortgage still appears on your vessel’s Abstract of Title, which can block a future sale or new financing. Follow up with the lender and the NVDC to confirm the release was recorded before assuming the lien is clear.