Best time to finance before retirement – Aviation Finance

If the goal is to present the best possible scenario of yourself to a lender, the answer is always ‘before’. Since most aircraft loans are based on cash flow (as opposed to “income”), the lender must see sufficient cash flow to pay all debts plus aircraft debt while leaving approximately 60% remaining to cover your cost of living.

Consistency is key for aircraft lenders, and they typically seek to ensure that cash flow is consistent year over year. When you transition from full-time employment to retirement, the income stream will generally be different. Whether it’s pension payments, IRA/401K retirement distributions, Social Security, and more. – lenders must be able to determine that the cash flow will be sufficient to cover all your bills, plus an aircraft loan and maintenance expenses. Some lenders may be willing to “project retirement income” via statements for 401K and IRA accounts, others may require up to 2 years 1099 and personal tax returns to assess what that looks like.

Generally speaking, it is best to seek aircraft financing while you are still employed full-time and to seek to complete the purchase of the aircraft before your official retirement date. This will make the process easier as underwriting will be based on the previous 2 years and current income versus needing to project retirement income or wait 2 full years of tax returns after retirement.

That’s not to say retirees can’t get funding. The point to remember is that with the more restricted cash flows a retiree enjoys, usually in the form of interest and/or dividends, residual income from the business or businesses in which the retiree may have an interest, or other retirement or retirement savings accounts, a lender must feel comfortable that the prospect will meet the aforementioned criteria. Some lenders may also make exceptions assuming that a conservative percentage of marketable securities could be used to service the debt. Again, most lenders look at actual cash flow to determine repayment capacity. Therefore, the options may be limited if you have income (or your investments grow), but you do not distribute the earnings as cash flow.

Very good advice. Excellent rates. Helpful and responsive representatives you can trust. Three good reasons to turn to AOPA Aviation Finance when purchasing or refinancing an aircraft. If you need a reliable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263) or click here to request a quote.

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