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Home equity loan to buy AC, good idea?

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Thanks all for the respones.

I think that i have been an excellent money manager so far and really did not want to make a major blunder. For instance i bought this house in 1994 at a 6 and 7/8 rate on a 15 yr mortgage (huge built in interest savings), i max out the 401K (over 800/mo deducted off the gross pay). I have about 60k in cold hard savings in the co credit union and yes i admit this money is really going to waste, ( @ 4.25 dividend rate) but i sleep better at night because of it. I too drive old cars (14 and 13 yrs old) even though obviously i could afford a very nice automobile) The house is currently valued at about 300K and i owe maybe 110k on it, so i'm way on the upside there. Already i own a plane outright, (i'm an experienced a and p and parts costs have been very reasonable so far) just looking to upgrade and live a little more comfy and faster in the skies) Sorta like a once in a lifetime purchase to have for the duration.... I'm thinking at this point, maybe a combination of cash and a more tradional loan to get the plane and just leave the house out of it, although the additional interst costs will be substantial. (and not deductable obvisously) Also buying in CA is a big 8% sales tax ouch! Also i came to realize that having a house is hugely important (duh!) and perhaps something i had been taking for granted lately, where else am i going to work on my cars :) thx for the wake call on that score.
 
Uhhmmm...i would just like to say I have no business offering you advice. You appear to be rock solid. 4.25% isn't money wasted. I have lost at least 4.25% per month for a few years now.

Plus I think your A & P changes everything. Please disregard my entire post as the ravings of a lunatic.

Old cars? Got an '83 ford bronco myself. That **CENSORED****CENSORED****CENSORED****CENSORED** 351W is a gas sucker.:D
 
The Windsor motor? Just look at what you would pay to feed gas to a Cleveland...:)
 
In your situation, I would go for the equity loan.

Two advantages

1) It will keep you liquid. Worse case scenario, you can always use the bank accout to pay off the loan.

2) The tax effect of the home equity loan would make your effective interest rate probably close to 3%.
 
JetPilot500 said:

Don't buy an airplane thinking it will be cheaper than renting...it's not. Don't think that if you will lease it back, then you can fly for free...you won't! Planes are not cheap no matter how you look at it. You can do all the calculating you want, but when the annual comes do and you find out you have problems, then what?

While owning may not be cheaper than renting it has many benefits:

1) You know who flew the plane last and what condition it was in. (So many rental planes get banged around and the renters never report this. Also, many renters don't clean up the plane etc.)

2) Most rental planes never get washed so it is difficult to tell if anything on the dirty belly is old or new.
(I just had an experience working on my commercial rating where there was a pool of oil under the plane and the previous pilot didn't say anything. It turned out to just be clean oil that was spilled but it took a while to figure that out.)

3) You can't take most rental planes for a multi-day trip without paying for non-flying time. If you are looking to build hours by owning your own aircraft you can fly around the country to visit friends and family. If you want to spend a day or two during the trip and not fly it's not a problem.

4) What if you fly some place and want to stay a few hours longer? In many cases you can't because someone has the airplane right after you.

5) If you own you can get the plane any time you want. This is great for those spur of the moment trips.

6) You get familiar with the configuration of your airplane which makes it much easier to fly IFR vs. switching from one 172 to the next, for example.

Owning my airplane has not cost me that much more per hour than renting. I know I have logged more time in the past 2 years because of having my own aircraft.

I too would not lease back my airplane. I have heard of horror stories doing this. I take pride in keeping my plane well maintained and clean. Most leasebacks get used and abused. Yes there are some schools who keep well maintained clean aircraft but at many of those schools you will pay around $100 an hour for a new 172. Yikes. Then owning is cheaping than renting.

So the bottom line is that a lot of the benefits are not tangible from a cost standpoint but they are very tangible when it comes to enjoying the flying experience.

Good luck,
AZPilot
 

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