LFGuard10 Posted July 10, 2008 Report Share Posted July 10, 2008 (edited) Anybody here take out a home equity loan for their flight-training? I talked wtih my dad earlier today and after explaining all of my intentions, he said that he is up for it. I have been looking into the aviation field for a couple of years now and know all the risks, etc. I understand that I will have to gain hours as a CFI, etc. We're going to look into what all we can do in the coming weeks. I actually hate to go this route, but Sallie Mae is a freakin' joke. Anybody have any tips, etc.? Edited July 10, 2008 by LFGuard10 Quote Link to comment Share on other sites More sharing options...
permison Posted July 10, 2008 Report Share Posted July 10, 2008 Anybody here take out a home equity loan for their flight-training? I talked wtih my dad earlier today and after explaining all of my intentions, he said that he is up for it. We're going to look into what all we can do in the coming weeks. I actually hate to go this route, but Sallie Mae is a freakin' joke. Anybody have any tips, etc.? You don't want to go this route. Look at the worst case scenario. Let’s say you don't get a job due to the market, medical issues, fuel prices, whatever. You have spent all that money 60K+ and now have jeopardized your parents home to do so. Unless your parents are very wealthy do you really want to risk their home over this? As a pilot there are so many things that can go wrong and keep you from being able to pay back that loan. Unfortunately I can't recommend many other options for funding at the moment (other then the Army). The helicopter market is not really stable (especially right now). You will need to get a job as an CFI to gain hours and there are quite a few out there from SS that you would be in competition with before you can make any real money (IE put food in your mouth money). It could be 2 or 3 years before you can start to pay that amount back. Hopefully someone else will have better answers. But take it all with a grain of salt. Don't listen to some kid who did what you are suggestion to do and is still in flight school. Talk with people who are actually working in the industry and not someone who is a CFI. Not that CFI's don't know what they are talking about but they have limited experience with the industry and many walk around with Rose Colored glasses believing that once they hit that magic 1000 hour then it is smooth sailing from then on. Quote Link to comment Share on other sites More sharing options...
Witch Posted July 10, 2008 Report Share Posted July 10, 2008 I took a home equity loan. So far it's been a good deal, but I've had to cut back on the flying because the balance has been getting more and more higher. Right now we were lookong at re-financing, but our rate is already low that re-financing wouldn't be cost effective. If you can do it and afford the payments, go for it. Otherwise, seek other options. Later Quote Link to comment Share on other sites More sharing options...
FauxZ Posted July 10, 2008 Report Share Posted July 10, 2008 I did a HELOC instead of a straight loan. I agree, the interest rates for my credit score for a student loan were a joke. With the HELOC, I can pay interest only if I have to, up to 10 years. While that's not the best bet for saving money, it does make it easy to pay the bills if a particular month is tight. My plan all along was to move and sell my home, so I hope to be back at zero before too long. For me, it has worked well so far. The drop in home prices has probably put me a little upside down on the house, but it has also dropped the interest rate dramatically. My minimum monthly payment has been cut by more than half. However, the others' concerns are valid. Your house is on the line if you can't make that payment for some reason. It's all about what risk you're willing to take. Quote Link to comment Share on other sites More sharing options...
Gomer Pylot Posted July 10, 2008 Report Share Posted July 10, 2008 I would never, ever bet the farm (or my home) on flight training. It will be years before you can even start repaying the loan, and losing your home, or you parents' home, is unacceptable risk, IMO. Taking a home equity loan for flight training is the most addle-brained idea I've ever heard of. Quote Link to comment Share on other sites More sharing options...
Chopperjess Posted July 10, 2008 Report Share Posted July 10, 2008 Someone mentioned this a long time ago, and I can't remember who. You might want to look into it more, but it's something to look at. Any options, right? prosper.com apparantly (Don't take my word on this, do your OWN research, and check it out) is apparantly a reversed ebay type deal. I really didn't look at it very much, but you can always check it out. Who knows, maybe it helps. Take care Quote Link to comment Share on other sites More sharing options...
Spierman Posted July 11, 2008 Report Share Posted July 11, 2008 To take out a loan on your home before you know if this career path is for you would be silly. But once you get your PPL, you may be more sure of your abilities/prospects and take a loan for the training. Quote Link to comment Share on other sites More sharing options...
FauxZ Posted July 11, 2008 Report Share Posted July 11, 2008 A loan is a loan is a loan. If you borrow against a large portion of money and don't pay it back, do you think you're not going to loose your home? If you don't plan for the worst, you'll be on the street, simple as that. Gomer always brings in the fact that a loan for training is dumb. And that's great if you can (or desire to) get your training from the military. If you're not independently wealthy, or don't want to take 3-5 years to complete training, a loan is what you have to do. Great thing about a HELOC is you only pay against what you use. You only pay interest on what you have borrowed against, not the total. For me, it was the BEST choice. I did the research, weighed the options, and spoke with my family about the consequences for us. Even after I'm done with the training, $66k on the HELOC, I still feel it was the best choice for me. I have no problems paying my bills, I'm not in danger of loosing my house (even if I don't have a job) and I'm paying less than half the interest rate I would be paying on a student loan. It is possible to be successful, with a family, and stable if you take out a loan, but only if you plan appropriately. And that includes planning for the worst case, and then plan a bit worse than that. Quote Link to comment Share on other sites More sharing options...
FUSE Posted July 11, 2008 Report Share Posted July 11, 2008 I didn't take a home equity, I just refinanced. Lucky thing for me is that I did it in 05' before the gas prices really went crazy and such, and I went with Boatpix. At that time it was 30k for 300 hours and I didn't have to pay for fuel. Adding 30k to my loan only added 2-3 years to my payments (I was only in 2-3 years of my 30 year loan) and because my credit score was so much better then 2-3 years before and the market was better I dropped a couple percentage points for my interest so it ended up making my monthly payments actually cheaper. So in my situation it was a deal. But not everyone has a situation like mine. I would find it hard to do that though for my son. Maybe if he already had his PPL then I would feel more secure, but knowing how young peoples minds (not saying it specifically about you) can switch in a second, it would blow to put up my house like that then have my son change his mind 70 hours into it... But no matter, it is only a wise decision if you (speaking to anyone thinking of this route) know you can make the payments not depending on the flying career panning out. Such as for me it really isn't panning out, but my house is in no danger. Quote Link to comment Share on other sites More sharing options...
delorean Posted July 11, 2008 Report Share Posted July 11, 2008 To get any loan you're going to have to put up some collateral. If you need your parents to co-sign, they're putting their assets up for grabs if the loan is in default. Like a previous poster said, the great thing about a HELOC is, you're only paying for what you've used. So if you get a $60,000 credit line, fly 20 hrs a month, that's pulling money at about $5,000 a month for one year. Instead of paying interest on $60K for 12 months, you're only paying interest on $5K for 12 months, another $5K for 11 months, another $5K for 10 months, and so on. Best of all, the interest is tax deductable! So to get the real rate you're paying: Take the advertised rate multipled by the inverse of your family federal tax rate. 6% x (1-28%) = 4.32% loan! The best HELOCs around here are WSJ Prime minus -1 pt for 20 years if you have less than 80% of your house financed after the HELOC's max draw. On 80%-90% you're looking at Prime plus 0.5-1.0 pts depending on their credit rating. It will be $1000+ in closing costs, title fees, and the appraisal's cost. The bad part about using a HELOC for non-house stuff comes when you want to move. If you want to move to a bigger house, that equity in your current house that you would usually use toward the next's down payment is going to be needed to pay off that HELOC. HELOC, Home equity loans, and mortgage's are tied to THAT property, not the person. And in theory, based off the purpose of those loans, the improvements you've made to your house with that money will pay for itself at the sale. A new HELOC will need to be taken out if they don't have the cash for to pay it and the downpayment at the same time. Closing costs and title fees will be due again which may wash out the tax savings. Mortgages and HELOCs are one of the last refuges for no BS tax deductions. Besides my house, I never buy anything I couldn't pay cash for, but I will always take ANY loan under 6% because I can easily make more than that in the stock market or just a hair under it in a tax free municiple bond index over the course of five to ten years. Now, borrowing against a 401K? Absolutely horrible idea. Quote Link to comment Share on other sites More sharing options...
Goldy Posted July 12, 2008 Report Share Posted July 12, 2008 I have a 19 year old son. He has absolutely zero experience doing anything in professional life. He just took a job as a file clerk making $15 bucks an hour. Most CFI's that I know are lucky to make $15 an hour, even less when you calculate how many billable hours they actually fly in any given day. And you want to take out a loan for this? You're nuts ! Sorry, but you are asking for opinions and that is mine. Join the military. Get the best training in the world and learn to fly. I'm sure it won't be easy, but if you really want it, it should not be a problem. Spending that kind of money for a helo job makes no sense to me. Go to college, get a biz degree, make 100K a year, and save up some of it to get your flying habits taken care of. You can fly when you retire as a 30 year old multi millionaire. Forget the loan. Goldy Quote Link to comment Share on other sites More sharing options...
Chopperjess Posted July 12, 2008 Report Share Posted July 12, 2008 15 bucks an hour as a file clerk! I've been a file clerk at my job since I was 16 (I'm 24 august 7th) and I only make 12! Oh ho, I'm going to be making some demands! Seriously however, if you get rid of your luxuries for a while, you can do it. I got my private license in a year and a half with my job. Yes, it took longer, but I still have it! After my PPL, I took a few months off, built a good backing of money (Saved my ass off) and I've been flying every other weekend. Slow, yes, but if you want it you can do it. I got rid of basically all my fun, except flying. It's nice to know that when I finally get my CFI and CFII out of the way, I'll have no flying debt to worry about! ...Do have to worry about those nightmares about file monsters.. They're getting less frequent however! Quote Link to comment Share on other sites More sharing options...
palmfish Posted July 12, 2008 Report Share Posted July 12, 2008 (edited) There's a lot of paranoia right now about mortgages and home equity loans, so I'm not surprised by some of the responses. Personally though, I don't think it's simple black and white. People use home equity loans for all kinds of things like home improvements, debt consolidation, and yes, education. Used wisely, a home equity loan is a great way to pay for these (and other) things. Most people losing their homes today are in their predicament because they were living beyond their means and didn't have any margin to ride out changes in their income or the economy. The way I see it, if he has sufficient equity in his home and a low debt to income ratio, then there's no problem. If he has little equity in his home and his debt to income ratio is tight, then more debt (of any kind) is a bad idea. Edited July 12, 2008 by palmfish Quote Link to comment Share on other sites More sharing options...
helifool Posted July 12, 2008 Report Share Posted July 12, 2008 In my opinion this is one of the best and ONLY options now for funding flight training. With SSH and the credit industry now there are so few options for those looking for financing. The simple fact is that people want to train and most need financing. I took out a HELOC and it worked great, I got a card that I could use like a credit card but was tied to the account, I only owe for what I use not the lump sum right off the batm and with the prime rate dropping so much lately my rate is at 5.75% which is way better than a private loan. The other nice thing about a HELOC is you can lock in your debt into a fixed rate at any time. If you can IMO this is the way to go. Just my 2 cents.... Quote Link to comment Share on other sites More sharing options...
Goldy Posted July 12, 2008 Report Share Posted July 12, 2008 Yes, the Heloc is the best vehicle for financing. I was questioning why anyone would want to finance 60K to earn $15 an hour. Makes no sense to me. (And Jess, he's a clerk at a big dollar law firm downtown) Enlist, or go earn the money to make it happen .....dont borrow it. Quote Link to comment Share on other sites More sharing options...
LFGuard10 Posted July 12, 2008 Author Report Share Posted July 12, 2008 In my opinion this is one of the best and ONLY options now for funding flight training. With SSH and the credit industry now there are so few options for those looking for financing. The simple fact is that people want to train and most need financing. I took out a HELOC and it worked great, I got a card that I could use like a credit card but was tied to the account, I only owe for what I use not the lump sum right off the batm and with the prime rate dropping so much lately my rate is at 5.75% which is way better than a private loan. The other nice thing about a HELOC is you can lock in your debt into a fixed rate at any time. If you can IMO this is the way to go. Just my 2 cents.... This is exactly my thoughts. There are so few options to get into this. Sallie-Mae is a joke, so I wouldn't take $1,000,000 if they gave it to me. Saving isn't really an option. And as far as the military, if I finally DID get accepted into WOFT, they'd boot me out because of my vision. I don't meet the army's requirements. Anyway, Goldy, no offense taken. Thanks for your input. I think though, that as long as I am CERTAIN that I can keep the payments up, and that AS LONG as my dad and I BOTH understand the consequences, that I should do it. HOWEVER, if we can't find an interest rate, payment plan, etc. etc. that him & I both feel comfortable with, I'm not going to do it. Quote Link to comment Share on other sites More sharing options...
fry Posted July 12, 2008 Report Share Posted July 12, 2008 The easy money days are over. In the first quarter the HELOCs that are past due more than 30 days DOUBLED from its historical norm. The lenders are cutting these way back: http://www.nytimes.com/2008/06/08/realesta...amp;oref=slogin Quote Link to comment Share on other sites More sharing options...
LFGuard10 Posted July 12, 2008 Author Report Share Posted July 12, 2008 Well, my dad also said that he is considering selling a chunk of land and just letting me borrow the $$ from him and paying him back over time. Fry, thanks for the link. I would just assume get the money from him and leave the credit bureaus, banks, and 'ole Sallie out of it. Anyway, we'll see how everything turns out. Quote Link to comment Share on other sites More sharing options...
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