Aircraft Finance

[Rupert S]

Being relatively new to the game. Can anyone give me an idea of how aircraft finance/mortgage works? Or generally how one finances a light aircraft.

Thanks

Rupert

[flyingfemme]

Pretty much the same way that any loan/mortgage works.

Your options are :
1. Unsecured personal loan - need to have a good credit rating and a friendly bank manager for that one but it's just like borrowing for a car.
2. Aircraft mortgage - a loan can be easily secured on an aircraft. The only people who are happy to do that (generally) are specialists like Lombard or Air and General, who charge a little more than the average high street bank.
3. Mortgage (or second mortgage) on property - most banks and financial institutions are only too happy to loan you money for anything you please on a home mortgage.

[Rupert S]

Thanks, FF. Number 2 seems to hit the mark. What strikes me as being slightly odd is the securing the mortgage against something as "high liability" as an aircraft. What are the implications regarding the insurance?

[bladewashout]

I got a quote for a loan from Lombard recently on a new airframe, about £100k.

They wanted around 20% deposit, and the terms left a 40% balloon payment at the end of 5 years.

I found this a bit steep as I would hope the a/c would be worth more than 40k after 5 years, however... the insurance was mandatory, so the a/c is not really high risk, as the required insurance should cover pretty much anything that would happen, and you are personally on the hook if for some reason the insurance didn't pay out.

I would guess (but I can't prove!) that they do a little digging on the principals of any company they loan the money to and ensure they have a reasonable shot at going after them if everything goes t*ts up.

BW

[Rupert S]

it's probably also worth mentioning that the potential aircraft is unlikely to be worth more than £50,000.