Financing question

[DC_Mooniac]

Quote: CABANABOY

I used Dorr Aviation Financing.  I would recommend talking to them about financing. They were very professional and always available. I feel like they did a great job for me and at decent rate.

[NotarPilot]

Quote: jelswick

I wanted to fly since I was about 6 or 7 years old.  I always told myself I'd do it when I became rich enough to afford it.  Then I got old enough to realize you're never really rich enough to "afford" it if you're doing it for pleasure because there's just not a great financial justification for them for many of us.  If you want it and can afford it, go do it before it's too late or you lose more time at it.  Unfortunately that was at about 35 years old 10 yrs ago and I wish I'd come to that realization sooner. 

[PTK]

Quote: xftrplt

The first statement is patently true.  The second, far less so.   But good luck.

[carusoam]

You are all right, and we all agree on the same things....

(1) interest rates are incredibly low, especially if refinancing your house is involved.

(2) mooney values are very low right now, but through a strange twist of fate can go to zero.  Especially if you fail to insure it prior to having an accident.  This can leave you paying for something you can't use.

(3) things always cost more than planned so don't overload your monthly financial responsibility.

(4) today we have to plan to live to our 80s.  Statistically speaking, some of us won't get there.  Leaving a chunk of cash behind is a by product of other unfortunate circumstances (cancer, heart disease, accident, etc.)

(5) I used Dick's advice when I bought my M20C.  Paid cash. A big chunk from my savings.  I was young and so was my mortgage.

(6) for the M20R, I used George's advice.  My mortgage is older and so are my children.

(7) You need to decide on your own...  Where are you financially? Where do you need to be?  What do you do with the plane if it becomes difficult to pay for.

(8) using the bank to help finance the plane does have an upside.  They make sure you do all the appropriate steps to proper ownership.  If this is your first plane purchase, it may be a good idea.  You can always refinance to a lower rate from a different source later.

(9) there won't be a better time to own a plane.  It will only stay the same or get more difficult...

(10) Notar, make it happen, but be fiscally responsible along the way.  The only way to enjoy the plane is to be able to afford it.

Best regards,

-a-

[N33GG]

I agree with many of the comments above.  More than many other activities and hobbies, flying can be out of the question when you get older through no fault of your own.  Medical issues can and do pop up with some of the most healthy people out there.  While you may still be able to travel the world, your pilot medical could be gone.  If you want to fly, go get after it while you are young!

[bnicolette]

Quote: xftrplt

 Neither informative nor helpful.  Plenty of folks here have much fancier rides than my lowly K.

[M20F]

If you qualify for the credit union Wings does 2.99% on a 5yr ballon for aircraft loans with 5% down.  Best deal I found.

https://www.wingsfinancial.com/asp/general_51.asp

[GeorgePerry]

Quote: carusoam

(6) for the M20R, I used George's advice.  My mortgage is older and so are my children.

-a-

[NotarPilot]

Quote: M20F

If you qualify for the credit union Wings does 2.99% on a 5yr ballon for aircraft loans with 5% down.  Best deal I found.

https://www.wingsfinancial.com/asp/general_51.asp

[carusoam]

Notar,

Be careful of loans that require refinancing a few years down the road.

Depending on your situation, financing the remainder of the loan may be impossible or extremely expensive.

Whatever loan you select, be sure to read and understand each paragraph.  They are written in understandable English.  They are not usually protecting your interest the same way a home loan would.  

Search this site for other examples of financing.

Best regards,

-a-

[Mooneymite]

Quote: xftrplt

I know interest rates are low, but, IMO, unless the plane is used for business, if you can't pay cash for it, and you don't absolutely need (as opposed to want) it, you shouldn't get it.

[jetdriven]

How many people here have $50,000 Tahoe's and Sea Ray boats.  I'm just saying,  I got my wife a 201 instead of a new BMW 335i.

[xftrplt]

Quote: jetdriven

How many people here have $50,000 Tahoe's and Sea Ray boats.  I'm just saying,  I got my wife a 201 instead of a new BMW 335i.

[carusoam]

Fortunately for us,

there isn't a one size income that fits all.

There isn't a one size financial responsibility that fits all either.

It takes all types to fly Mooneys, from those that focus on it, to those who only do it because it gets him from here to there.

Right for one is not necessarily right for all....

JetD,  I bought my Tahoe used, and my sea ray got cut from the list of things I need to have in life.  no beemers here....

Two kids to get through college, getting closer....

Owning a plane takes a financial commitment.  It is easy to get into, and rewarding while there.  It is easy to get out of also,  it is challenging to minimize the amount of money spent during this life cycle process.

I think a guy who flys helicopters for a living knows best what is involved in owning a private plane.  Moreso than I could have when I bought my first plane.

If you want a plane.  Buy it.  Know what it takes to afford it.  Try to minimize money spent on interest.  Interest is $100s of dollars spent per month that will never add value to your machine.  Businesses get to write it off.  Homeowners can deduct it.  Ordinary people have to adsorb that cost.

Pay it down quickly to minimize total interest payments or as George points out, invest your excess cash if it can earn more than the loan interest.

Either way start saving.  Great planes become available every few months.  Pick a good one.

 

Best regards,

-a-

[jetdriven]

Good point.  People often trade in their 700$ a month 3-year-old Tahoe for another 700$ a month one. Alwayy paying as well.

Pay it into a 15 year note on a plane, in 3 or 4 new Tahoes you have yourself a paid-off Mooney, thats including the other expenses of owning.  Straight payments, 80% LTV on a 70K m20J is 480$ a month at 6.25%.   10 years is 628$. 

You can make it happen. You just cant have it all.

Quote: xftrplt

And how many people have 20-year loans on them?

I'm all for toys, just suggesting they not be financed long-term.

[N601RX]

When we got our plane about 1-1/2 years ago plane loans were running around 7%.  By using a CD as colateral instead of the plane made things much simpler and the interest rate was only around 4.00%.  Many 401K plans will let you borrow against them and you just pay yourself interest.  Both of these options also keep the plane title clear.

[jetdriven]

Using the CD as collateral, what was the interest paid to you on the CD? 

[rob]

What are current loan rates on small aircraft?

Someone said earlier in this thread that Mortgage rates were below 3.9APR. thats not quite accurate. Interest rates on 30 year fixed mortgages have dropped to 3.875 a few times recently, but the APR is still around 4....

 

[N601RX]

Quote: jetdriven

Using the CD as collateral, what was the interest paid to you on the CD? 

[carusoam]

N601RX,

What is the upside of the CD arrangement?  Is it  If interest rate increases over time the balance is in your favor?  Plane interest will stay constant,  CD can be renewed at a higher rate?

I am not sure how many people can take advantage of this option.  If you have $100k in the bank.  You don't need a loan.  If it is locked up until you repay the loan, it can't be used to pay tuition or rent.

Thoughts on 401k money.  If you decide to change jobs, the loan needs to be repaid in short order.  It will be a difficult time to refinance if the job decides to quit you (lay-off).  Paying yourself interest sounds enticing.

Deep financial questions make you prioritize your wants.  

Your other options...work harder, work longer, work smarter, marry wealthier or win lottery.

The value of your Mooney may go down for no apparent reason.  It may also go up in value for no apparent reason.  It is not usually classified as an investment.  It is not gold.

Best regards,

-a-

[PilotDerek]

I finaced my mooney. I have no buisness nor plan on it. My mooney is for my family enjoyment. Renting was out of the question as the closest airport to rent from is over an hour away and a comparable plane would cost me an hour what my monthly payment is. Now we have a plane available when we want 15 mins from the house. I don't disagree that if you are capable of buying it outright than do so, but if you can't there is no shame in borrowing. I am actually surprised at how many view borrowing negatively. The only need in life is food and water. You don't need a house, you can rent. You don't need a car, you can use public transportation. Prioritize your wants, that's what ownership takes. My two cents.

[NotarPilot]

On a sidenote, does anyone know about tax benefits of aircraft ownership.  I've seen some ads mention being able to write something off like the depreciation.  Does anyone know anything about that?

[GeorgePerry]

Quote: NotarPilot

On a sidenote, does anyone know about tax benefits of aircraft ownership.  I've seen some ads mention being able to write something off like the depreciation.  Does anyone know anything about that?

[Tony Armour]

If you can afford it, one of the best things in the world is to own your own Mooney. Finance or not, doesn't matter. I bought/financed my 201 in 1998,  purchased/financed the TLS in 2005 then sold the 201. There have been times over these 13 years that I have had the loan collateral on the airplane, had the airplane loan collateralized on property, even a period of time when I had the plane as collateral for a loan used to purchase properties. Run the numbers on everything and use what works best for your situation. If you can afford to make the payments and associated costs go for it !! It costs $$ to have the pleasure but I know when I tuck my TLS in the hanger it's there anytime I need it on a moments notice and (very important) that no one has touched it.

I look back (as most pilots probably do) at when I started flying and think...Man, I wish I had done that years earlier. I'm glad I don't have to do that about owning my Mooney's.

[rbridges]

Quote: bad1996

I look back (as most pilots probably do) at when I started flying and think...Man, I wish I had done that years earlier. I'm glad I don't have to do that about owning my Mooney's.