Financing an Aircraft in Retirement

One of the focal points for aircraft lenders when deciding to issue a loan, and how to structure it, is income consistency. 
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If you've worked a W-2 job, or you're self-employed, and your earned income has been relatively strong and consistent you would most likely qualify.

However, let’s say you retired at the beginning of this year and you’re living off whatever combination of income you have for retirement. While that’s a great position to be in personally, from a financing perspective, it can be a problem because now, your last two years of earned income history have become irrelevant. Add to that the scant amount of history you’ve accrued living on your retirement income, and for an aircraft lender, that significant change in income may make them reluctant to offer a loan.

The quickest way to ease a lender’s anxiety is to wait on the purchase. Give yourself a few years of retirement income before applying. Prepare at least a couple of years in advance to be taking a bigger tax hit on your retirement income, and to have some additional income coming from those retirement sources.

Lenders want to see that the aircraft loan is not going to be a financial stress on the borrower. Typically, what lenders are looking for on the expense side is what's on your credit report: mortgage or rent, car or boat payments—large outstanding debt. Then they add the aircraft loan payment to gauge whether your income has room to absorb an aircraft loan and associated aircraft expenses.

On the income side, lenders are looking at both the sources and amount of your retirement income. It’s important to provide verification of all retirement income. That verification comes in the form of 1099s and Retirement Account Statements.

Social Security sends verification of your upcoming monthly payment at the end of each year and provides a 1099 showing the annual amount received. 401Ks, 403Bs and IRAs generally provide a distribution report at the end of the year, or again, a 1099. Again, two years’ worth usually suffices. If you have a pension, VA retirement income, VA disability payments or other disability payments, you should be prepared to submit your award letters for verification.

Finally, the lender will look at your retirement account balances to confirm that sufficient funds exist in the accounts to continue similar distributions well into the future.

Do you have a question about aircraft financing? Our team has the answer for you! Submit your questions here. Great terms. Helpful and responsive reps. Those are the reasons to turn to AOPA Aviation Finance when buying an airplane. If you need a dependable financing source with people on your side, call 800.62.PLANE (75263) or click here to request a quote.

AOPA Finance Team

Knowledgeable and friendly aircraft finance professionals you can trust to find the best terms for your financing needs. Our goal is to make aircraft ownership more affordable and accessible to pilots.
Topics: Financing

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