Financing question

[NotarPilot]

I'm planning on buying my first Mooney soon and recently started thinking what would be the best way to finance.  I'll be putting 15% down and I'm considering a 15 year loan.  I got to thinking though, do you finance a plane as long as possible (20 years) to keep the payments as low as possible with the intention that you will probably never keep the plane long enough to pay it off or do you go for a go for the shorter 15 year note to start building equity faster that you can recoop in a resale?  I know you pay more in iinterested at the beginning as opposed to more principal as the loan goes on.

Ideally I think I would try and keep my plane as long as possible to eventually pay it off and keep it but you never know.  I may end up wanting to move up to something else one day.

What do the more experienced guys who have financed a plane here think?

[PTK]

If you can afford to it's always best to pay it off ASAP. This way you build equity for yourself rather than pay it to the bank in interest.

[74657]

I put down 30% on mine and have it on a 15 year.  With interest rates as low as they are it doesn't hurt to keep a note on the plane.  I prefer to build cash in reserve for needed/unexpected repairs, like an engine overhaul.  Then, instead of refinancing to pull equity back out of the plane you have the money handy.  I hold ~5-10% (depends on time of year) of the value of the plane in CASH reserve, not including the loan payment (which I pay every 2 weeks).  Just my .02. 

[GeorgePerry]

If you have a good a HTER (home to equity ratio), you might consider a home equity loan or a REFI.  Mortgage rates on a 30 year fixed, are at an all time low (Less than 3.9% APR w/ good credit).  Some people hear the words Home Equity Loan, have flashbacks to the 2008 housing crash and think its a financial instrument to avoid.  I disagree.  In this case you've already decided you're going to take a loan.  Who would you prefer to take the loan from...AOPA/BOA or yourself?  Plus if your credit is good and you've got some equity in your home, the money you're borrowing will cost significantly less over the life of the loan.  (In most cases, interest on a HEL is tax deductible)

My suggestion, take some $ out of your house and pay cash for the Mooney.  Refi the house and probably keep your payment and amortization schedule close too, or better than what you have now.  If you go with a straight HEL without a REFI, the interest rate on your HEL will be MUCH lower than straight aircraft financing. 

Mooney's aren't like cars...they don't depreciate, at least not in the traditional sense.  Their values do change, but used aircraft values ususally fluctuate with macro enconomic trends, condition, and times left on components that require maintenance.  Buy it, fly it, and when you're done with the plane, sell it and put the $ back into your mortgage....Or go to Vegas and bet on black (that last part's a joke)

 At least it's something to consider....OMMV

[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.

[Guest]

I'd Finance the plane for the longest terms and lowest payment I could get, you never know what lays down the road. I took mine out for 15 but paid a few extra bucks every month, paid it off in 9 and saved a bundle in interest. I have now owned my aircraft a little over 16 yrs. For me, going this route it allowed me to pay cash for every upgrade I performed. 

[NotarPilot]

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.

[rbridges]

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.

[Bob]

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.

[bnicolette]

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.

[kgbpost]

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.

[kgbpost]

seriously though, 15% LTV is bare min. Did you try a broker to shop rates? Dan  Garzelloni  at Mile High Financial is  my guy. dont use a wall street bank if you can help it...theyre all crooks.

[RJBrown]

Quote: rbridges

 I have to respectfully disagree.  What you're saying makes great financial sense, but I bought my plane for emotional reasons, too.  I can comfortably afford my payments and unexpected hiccups that come with ownership.  I put 20% down and financed instead of taking a larger chunk out of my savings.  I did think practically and bought a C model which runs the price of a nice car but well below the 6 digit costs of the newer planes.

[kgbpost]

I have a super decathlon under contract which is an all cash deal...i might call that a toy. i dont refer to my TLS Bravo as a toy. semantics i suppose.  

[FAST FLIGHT OPTIONS LLC]

Edit

Edited April 7, 2018 by 231-FLYER

[xftrplt]

Why would you say that?

[NotarPilot]

Unfortunately not all of us can pay cash for an airplane.  It would certainly be nice to do that but it would take several years for me to do.  And as my book "Airplane Ownership" says... "Renting is the pits."  You never knew who flew the plane last and how they flew it, and you always have to have it back on time for someone else.  Not to mention the daily hour minimums.  It sucks and because of that I haven't been big on renting.  Personally I plan to use my plane to fly to work on days I don't want to deal with LA traffic.

Anyways, to get back on topic, the question was if there was an advantage to a 15 year vs. 20 year loan on the plane and why?

[jetdriven]

There is no option to rent a Mooney I have seen. Here and there one pops up for 200$ an hour, but your Oshkosh trip is going to cost you 3500$ and even more with a daily minimum. A couple of those a year and owning looks pretty good.  An F33A is for rent here but it is almost 300$ an hour.

Anyways, all the major lenders, Dorr, Airfleet, BoA wouldnt look at us below a 70K loan amount and 20% down.  BoA's interest rate below that 70K value was something like 12%.  Bank of Pryor was in the real high 7s. We went 3 ways on a 15 year note with a local Credit Union at around 6.25% IIRC, with 20% down.   No one was close to them.  So consider all sources.   This was our first airplane purchase and even the first  201 we went to look at.  It worked.  Partners make it so much easier.

[Ncbosshoss]

Quote: jetdriven

There is no option to rent a Mooney I have seen. Here and there one pops up for 200$ an hour, but your Oshkosh trip is going to cost you 3500$ and even more with a daily minimum. A couple of those a year and owning looks pretty good.  An F33A is for rent here but it is almost 300$ an hour.

[PTK]

This isn't very complicated. Buy a Mooney you can comfortably afford and work out worst case scenarios to avoid finding yourself upside down in it. Financially speaking but while flying also! Use whatever financial tools and structure available to you to achieve that. 

Before you know it you're going to be old and gray. I know when I get there I will never regret the things I did. Only what I didn't do!

 

 

 

 

 

 

 

 

 

[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.

[74657]

I don't know much about your age/lifestyle/cash flow but here is something not many people have touched on.....  The fun factor.

My dad ran a successful business and paid for everything in cash from the time he was 40.  He died with a good pile of money in the bank at 53.  I know looking back he may not approve of me having a "mortgage" on an airplane but the way I see it, he died too young.  None of us know how long we will be around - might as well have as much fun as we can while we are here.  I don't mind telling people that I have a loan on my plane.  No shame.  All it takes is good credit and decent cash flow.

In my opinion, whoever is telling you that having a loan on a plane is not a good idea has a different perspective on life in general.  Perhaps they should tell their wives to buy them an XXL casket when it's their time so they can pack that baby full of every last dollar bill sitting in the checking account, 401K and stock market.......

I'm a young guy (29 almost 30) and unless I was spoiled, living off of a trust, or extremely lucky, there is NO WAY that I could afford my home, family and pay cash for a 150K airplane.  To pay for the plane, I set up a business that is paying for it.  I have had 888DF for over a year now and have not dug into my own pockets yet (that includes paying for an engine OH when my gear collapsed). 

It would be nice to pay cash for an airplane.  I did that with my Tiger.  Having a loan on my Mooney isn't a big deal to me.  If I had to wait 5-6 years to pay for 888DF in CASH before buying I would consider it a huge waste of time.  Thats 5-6 good years that you can't get back.

 

 

 

[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. 

Most people finance their planes (I know that from brokering them for others for 7 years).  Some don't and that's great if they don't have to.  If that's not you (or me), make sure the payments are not a stretch for you and that you have enough reserved to never have to say no when your mechanic recommends a needed repair or update and go for it!  You want to maximize the time you have in flying before you feel you have to retire from it and if that means financing it, and you can afford it, then do it now!  BTW, I tell people when they ask if it's expensive, well, I don't golf or a number of other things.  Everyone puts some of their money into enjoying life and this is where I put mine.  Cheers and this is just my two cents, but it works for me!

[xftrplt]

Quote: allsmiles

Before you know it you're going to be old and gray. I know when I get there I will never regret the things I did. Only what I didn't do!

[jelswick]

Quote: allsmiles

Before you know it you're going to be old and gray. I know when I get there I will never regret the things I did. Only what I didn't do! 

 

Amen and completely agree!