When purchasing a yacht or superyacht, choosing the right finance structure can be just as important as choosing the vessel itself. The decision on how development finance broker the acquisition typically comes down to two options – a yacht mortgage or a lease agreement.

Both options can be used to fund the purchase, however they are structured differently and suit different borrower profiles, ownership objectives, and tax considerations.

Before approaching lenders, it is important to understand how each structure works. The chosen route affects ownership differently, along with the structure’s cash flow, loan-to-value, tax treatment, exit strategies, and overall flexibility.

What is a Yacht Mortgage?

A yacht mortgage is a secured loan used to finance the purchase or refinance of a yacht or superyacht. With a yacht mortgage, the borrower will usually own the vessel, either in their personal name or through a company/SPV.

The lender will normally take a registered charge over the yacht as security for the loan.

The loan’s structure is similar to that of a property mortgage – the lender advances funds against the value of the asset, and the borrower repays the loan over an agreed term.

Marine finance differs from a standard property mortgage in the way lenders assess and underwrite the transaction. Yacht lenders will typically focus on the following factors and aspects of the deal:

Value and condition of the yacht
Age of the yacht
Builder of the vessel
Flag and registration of the yacht
Intended use of the yacht (e.g. private use vs chartering)
The borrower’s net worth, income, and liquidity
The ownership structure
Proposed LTV
The exit strategy or repayment strategy

For larger superyachts, lenders will also assess the borrower’s or UBO’s wider relationship value, assets under management (AUM), private banking relationship, and overall financial profile.

What is a Lease Agreement?

A lease agreement is a different type of funding arrangement. In contrast to the straightforward secured loan provided through a yacht mortgage, the vessel is typically purchased and owned by the bank, lender, or leasing company during the term of the lease.

When a bank or leasing company (the lessor) purchases and legally owns the vessel, the borrower (the lessee) is granted the right to possess and use the vessel during the term in return for an initial down payment and periodic lease payments to the lessor.

A lease separates:

Legal ownership: held by the lessor during the lease period.
Use and possession: granted to the lessee.
Economic responsibility: allocated between the parties depending on the type of lease.

It is important to note that this is not the same as short-term yacht chartering. A lease is a longer-term financing arrangement structured to support the acquisition or use of a specific vessel.

At the end of the lease period, the lessee will usually have the option to either purchase the yacht, extend the lease period, or return the vessel, depending on the structure and terms of the lease agreement.

The Main Types of Lease Structures:

Finance lease

Under a finance lease, the leasing company purchases and legally owns the vessel, while the client uses it and makes regular lease payments over an agreed term. Although the lessee does not legally own the vessel, they will commonly assume many of the costs, risks, and responsibilities associated with its operation, including maintenance, insurance, and operating expenses.

At the end of the lease period, the lessee will have a few options depending on the agreement, including purchase, refinance, or sale. From a cash flow perspective, a finance lease is very similar to a standard yacht mortgage, however the main difference is legal ownership of the vessel.

Operating lease

The structure of an operating lease focuses on the use of the vessel rather than funding the purchase. Whereas a finance lease may give the lessee the option to purchase the yacht, the vessel usually returns to the lessor at the end of an operating lease, although an extension or purchase may sometimes be negotiated.

During the term of an operating lease, the leasing company remains the legal owner of the vessel (as with a finance lease), however they generally retain greater exposure to the yacht’s residual value.

The periodic payments during the term of an operating lease are typically based on the vessel’s expected depreciation, along with financing costs and the lessor’s return. An operating lease may also contain some restrictions regarding usage, cruising area, maintenance, and the vessel’s condition when it is returned.

LOA – Lease with Option to Purchase

A Location avec Option d’Achat (LOA) is a French leasing structure under which the client pays an initial deposit and regular rentals while the leasing company owns the yacht. The lessee has a contractual option to purchase the yacht during or at the end of the term for a predetermined amount. An LOA is therefore generally a form of finance lease with an express purchase option, rather than a completely separate leasing category.

Key Differences: Yacht Mortgage vs Lease

The main difference between a yacht mortgage and leasing arrangement is ownership. With a yacht mortgage, the borrower legally owns the vessel from the start, with the lender taking a charge over the vessel as security for the loan. Under a lease agreement, the founder owns the yacht during the term of the lease, and grants the client the right to use it, often with an option to purchase the vessel at the end of the lease period.

Ownership and Control

A yacht mortgage is suited to buyers wanting direct ownership and control over how the vessel is used, maintained, and sold. Leasing arrangements do not offer this level of control as the leasing company often imposes conditions on the vessel’s use, cruising areas, insurance, maintenance, and operating obligations.

Upfront Contribution and Payments

Both finance structures will typically require an upfront cash contribution from the client. With a yacht mortgage, the loan amount is based on the lower of the purchase price or valuation, and the lender will advance a specific percentage of this figure, with the balance funded by the borrower. Under a lease agreement, the lessee may pay an initial deposit, followed by periodic lease payments. These payments are usually structured around the cost of the vessel, term of the lease, and assumed residual value.

Tax and VAT Considerations

Tax and VAT treatment can influence the choice of structure, with many buyers exploring leasing to benefit from its tax and VAT implications, particularly where the yacht is owned through a company or SPV. That said, the resulting treatment largely depends on the vessel’s jurisdiction, area of use, flag, borrower residence, and the use of the yacht (private or commercial). Leasing should not automatically be regarded as a tax-efficient alternative to a yacht mortgage, and it is important to get legal and tax advice from a specialist first.

Availability and Lender Appetite

Yacht mortgages are offered by specialist marine lenders, private banks, and asset finance providers. Leasing is available from a smaller group of niche providers and may depend more on the location of the yacht, age, value, intended use, and ownership structure. The yacht mortgages that private banks offer usually come with a requirement to establish a wider wealth-management relationship with the bank, involving opening an account and placing a portion of assets or liquid investments with the bank. Specialist marine lenders don’t have this requirement and will usually focus more directly on the vessel itself as security for the loan.

Refinancing and Exit

A yacht mortgage can involve a relatively straightforward exit. The borrower can repay the mortgage by refinancing with another lender, or they can sell the yacht to repay the incumbent lender. Under a lease agreement, the exit depends on the terms of the contract. At the end of the lease term, the lessee may purchase the yacht, return it to the lessor, extend the lease, or arrange a sale.

Summary

Overall, there is no single “right” structure. The choice of funding depends on the objectives of the borrower, the nature of the yacht, and the intended use of the vessel. A yacht mortgage generally suits buyers seeking direct ownership and flexibility, whereas a lease arrangement may be a better option where tax, VAT, ownership structure, or cash flow management are key considerations for the borrower. In practice, the most pragmatic approach is to compare the two options against your objectives before committing to a structure.