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Short-Term Rates Drop
Friday, August 19, 2011
At AirFleet Capital, we offer a variety of rates and terms to meet the differing needs of our clients. Terms in many cases, extend to 20 years for private-use aircraft built within the past 30 years, with fixed and variable rate alternatives. Fixed rates have recently dropped to new lows - with rate offerings in the low 5's for loans over $100,000. This isn't a significant departure from where rates have been throughout most of 2011, as rates started the year in the mid- to upper 5's for this same segment. However, shorter-term rate products have dropped more significantly in the past few weeks, providing a unique opportunity for aircraft buyers who trade-up frequently (i.e. within a 3-year time frame).
Our 3-year rate product (a 3-year ARM or Adjustable Rate product), adjusts each 36 months during the term of the loan, which could extend to 15 or 20 years. This rate product is now hovering below 4.50% as of this post (4.39% on 8/19/11) - a great rate incentive for buyers.
What type of customer would use this shorter-term rate product? We find that many of our clients refinance or upgrade within a 3-4 year window. This may include refinancing to upgrade/overhaul the engine, improve the avionics panel, update the paint/interior, or to step-up to an entirely different aircraft to get better range/payload performance. This type of loan program is great for those buyers.
Thinking about refinancing instead of something new? You may be asking yourself, "when does it make sense to refinance my aircraft loan?". Consider this; in most cases the fees to refinance are minimal - much lower than are often found in the home mortgage industry. If you do not have a pre-pay penalty on your current aircraft loan, you may find that as little as a 1/4 point drop (0.25%) in interest rates will provide a benefit to you in less than 9 months for larger loans (i.e. loans over $1MM). For loans in the $150,000 to $500,000 range, you may need to see a 1/2 point rate reduction (0.50%) for a benefit within the same period.
Whether you're looking to upgrade with a different financing product, or considering refinancing to lower your rate, now is a great time to lock in low interest rates! Please give us a call and we can prepare a financing proposal to meet your needs.
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