Aircraft Loan Refinancing?

Groundpounder

Groundpounder

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Emerson Bigguns
I have a loan on the airplane I bought just over a year ago. The APR is pretty good, 5.35%, but just wondering if the low federal interest rates would get us a lower APR, and if it would be worth trying to refinance? I just refinanced my mortgage, and it is saving me a pretty good chunk of money.
 
Why not? Let us know what rate you get given that the Fed has just announced they'll keep rates close to zero through 2022.
 
Groundpounder said:
I have a loan on the airplane I bought just over a year ago. The APR is pretty good, 5.35%, but just wondering if the low federal interest rates would get us a lower APR, and if it would be worth trying to refinance? I just refinanced my mortgage, and it is saving me a pretty good chunk of money.
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Not for aircraft, it's niche market with few lenders; unless someone takes a second on the house then much cheaper rates.
 
2.3% locked for 4 years... HELOC . For my recent avionics upgrade
 
Can’t just look at the rate. You have to figure out the costs associated with a refi. Home mortgages are different in that most “experts” believe you need to remain in the house for at least 3 years so the cost of a refi can be recovered from the reduced monthly payment. You also have to figure out where you are amortization curve. If you are in the steep part of the curve, I.e., have a pretty new loan, then substituting for a lower interest loan make sense if you can recoup the refi costs since you are getting little principal reduction. If you are on a point in the curve where you are getting 40-45% principal reduction, you need to thing about whether refi makes sense because you will go back to the top of the amortization curve and pay essentially 99% interest for the next few years.
 
I am impressed with people that leverage their money. I am so averse to debt. Homes are my only allowance of debt. I’m pretty sure I’m “wrong”, but I hate payments. 4% on a plane probably is great. I’m refinancing my house at 3%...
 
TheFB said:
I am impressed with people that leverage their money. I am so averse to debt. Homes are my only allowance of debt. I’m pretty sure I’m “wrong”, but I hate payments. 4% on a plane probably is great. I’m refinancing my house at 3%...
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I too am adverse to debt but sometimes there are calculated risks that have to be taken in order to enjoy life.

In this case, there is no way I would be able to save up the capital I need to buy my partner's share in a timely manner AND continue to fly it.

You can make memories or you can make excuses has always been my theory.
 
Jumpmaster said:
Can’t just look at the rate. You have to figure out the costs associated with a refi. Home mortgages are different in that most “experts” believe you need to remain in the house for at least 3 years so the cost of a refi can be recovered from the reduced monthly payment.
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Most "experts" would be wrong.
In times when the interest rate is decreasing, one may request a negative point loan. A negative point without a prepayment penalty is a no-brainer if it lowers your interest rate. A negative 1 point on a 300k loan amounts to 3k the lender is paying you to buy the rate up. If that 3k covers your closing, it costs nothing to come out the backside with a lower interest rate. If rates continue to fall, refinance again without penalty or loss.
 
Sometime one has to say WTH, or whatever. By that I mean, once older(age varies) many have the litany of health concerns to deal with. At that point an airplane won’t be on the list.

Seems many kids have a touch of ‘afluenza’ these days, do they need a lump-sum inheritance adding to it?

As long as the basics are covered, some savings & retirement plans, go for it. Just by rearranging vehicle buying one can free up some $$. Compare that BMW SUV to a used Mazda 3.
 
sourdough44 said:
Sometime one has to say WTH, or whatever. By that I mean, once older(age varies) many have the litany of health concerns to deal with. At that point an airplane won’t be on the list.

Seems many kids have a touch of ‘afluenza’ these days, do they need a lump-sum inheritance adding to it?

As long as the basics are covered, some savings & retirement plans, go for it. Just by rearranging vehicle buying one can free up some $$. Compare that BMW SUV to a used Mazda 3.
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I love my used Mazda 3
 
k9medic said:
I too am adverse to debt but sometimes there are calculated risks that have to be taken in order to enjoy life.

In this case, there is no way I would be able to save up the capital I need to buy my partner's share in a timely manner AND continue to fly it.

You can make memories or you can make excuses has always been my theory.
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I initially financed my plane, also. It got me flying earlier, and the payment wasn't an issue. Sometimes the benefit outweighs the risk, but it's definitely a personal decision.
 
Jumpmaster said:
Can’t just look at the rate. You have to figure out the costs associated with a refi.
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Ding ding. You can’t just say “hey! I got a 2% loan!”, especially if it’s really “hey, I got a 2% loan [and had to pay $5,000 in closing costs]!”.
 
Yeah, I went to refinance my house to go from 4% -> 3% and let me tell you... Don't ever use RocketMortgage. They wanted to add $28k to my principal, lengthened the loan 2 extra years and the APY worked out > 4%!? So owe more, for longer and at a higher rate. Their sales people kept calling and texting for a week (both my wife and I.)

On aviation or anything, if someone wants to loan me money for 20+ years at 3% then I should be happy to take it. I'd never loan that much for that long at such a low amount.
 
Willingness to borrow is not victimless though. The irony of course being that, if people weren't so willing to promissory their future labor for a trinket today, the trinkets would cost half as much. Classic tragedy of the commons behavior.
 
hindsight2020 said:
Willingness to borrow is not victimless though. The irony of course being that, if people weren't so willing to promissory their future labor for a trinket today, the trinkets would cost half as much. Classic tragedy of the commons behavior.
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It’s inefficient to rent a car too, you should buy a car with cash when you travel or you’re wasting money.

all you tycoons that think debt is always evil haven’t studied the habits of highly successful people very much.
 
Salty said:
It’s inefficient to rent a car too, you should buy a car with cash when you travel or you’re wasting money.

all you tycoons that think debt is always evil haven’t studied the habits of highly successful people very much.
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I'll stipulate your point about renting when these financed millionaires stop calling themselves "owners".
 
TheFB said:
I am impressed with people that leverage their money. I am so averse to debt. Homes are my only allowance of debt. I’m pretty sure I’m “wrong”, but I hate payments. 4% on a plane probably is great. I’m refinancing my house at 3%...
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I agree with your debt philosophy. With inflation at 2% and loans at 3-4% it's nearly free money. If the inflation rate goes up, the bank is essentially paying you for the loan.
 
Salty said:
It’s inefficient to rent a car too, you should buy a car with cash when you travel or you’re wasting money.

all you tycoons that think debt is always evil haven’t studied the habits of highly successful people very much.
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Actually, I have studied the habbits of highly successful people, millionaires, etc. I've studied the habbits of broke people.

What I've come up with is 1) live below your income, 2) avoid debt, 3) end up living extremely well, much better than most.
 
NordicDave said:
I agree with your debt philosophy. With inflation at 2% and loans at 3-4% it's nearly free money. If the inflation rate goes up, the bank is essentially paying you for the loan.
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Even if interest was 0%, it's still debt and you still have that debt payment hanging over you in the future. For me, I don't want that obligation next month. I really like the freedom of spending how I want to.
 
WDD said:
Actually, I have studied the habbits of highly successful people, millionaires, etc. I've studied the habbits of broke people.

What I've come up with is 1) live below your income, 2) avoid debt, 3) end up living extremely well, much better than most.
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If you want to stick where you are, sure, but if you want to become wealthy, you leverage debt wisely.
 
Salty said:
If you want to stick where you are, sure, but if you want to become wealthy, you leverage debt wisely.
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Why do you assume I’m not wealthy because I avoided debt ?
 
WDD said:
Why do you assume I’m not wealthy because I avoided debt ?
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It's extremely rare for someone to become wealthy without leveraging debt. You can move up a little, and you are less likely to lose, but to make a crapload of money you leverage debt.
 
Salty said:
It's extremely rare for someone to become wealthy without leveraging debt.
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Suggest you read the millionaire next door. Might offer a different POV
 
WDD said:
Suggest you read the millionaire next door. Might offer a different POV
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Millionaire is not wealthy anymore. A million will barely keep you at the same standard of living through retirement.
 
WDD said:
Suggest you read the millionaire next door. Might offer a different POV
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What makes you think I am in debt? ;)
 
just because you can pay x dollar down to buy a toy or a house or a whatever doesnt mean you should. there is opportunity cost for everything. if you take out a loan on 50K at 4% or whatever and use that 50K to get 6% - 10% or more return, highly possible by the way if you pay a little attention to trends in stock market ... you are way ahead
 
Jumpmaster said:
Can’t just look at the rate. You have to figure out the costs associated with a refi. Home mortgages are different in that most “experts” believe you need to remain in the house for at least 3 years so the cost of a refi can be recovered from the reduced monthly payment. You also have to figure out where you are amortization curve. If you are in the steep part of the curve, I.e., have a pretty new loan, then substituting for a lower interest loan make sense if you can recoup the refi costs since you are getting little principal reduction. If you are on a point in the curve where you are getting 40-45% principal reduction, you need to thing about whether refi makes sense because you will go back to the top of the amortization curve and pay essentially 99% interest for the next few years.
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$695 closing fee. It will pay for itself in a year.
 
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