Aircraft Cash-Out Refinance: Using Your Airplane's Equity for an Overhaul, Panel or Paint
This guide is for owners who have built equity in their airplane and want to put some of it to work: on an engine overhaul, a panel upgrade, or paint and interior. It shows how lenders size the cash, what the payment does, and when a cash-out refinance is the expensive way to do it.
Cash-out vs rate-and-term refinance: what changes
| Rate-and-term refinance | Cash-out refinance | |
|---|---|---|
| New loan amount | Payoff plus closing costs | Payoff plus costs plus cash to you (or to the shop) |
| Goal | Lower rate, shorter or longer term, fixed instead of variable | Fund an overhaul, avionics, paint or interior, sometimes with a better rate too |
| Loan-to-value | Stays about where it is | Rises; the lender's LTV cap sets how much cash is available |
| Value evidence | Valuation review or appraisal | Appraisal is more likely; the lender may ask how the cash will be used |
| Pricing | Standard for your credit tier and aircraft | Some lenders price higher LTV or cash-out loans differently; ask |
The mechanics of the payoff, lien release and FAA recording are the same for both types. They are covered step by step in how to refinance an aircraft loan.
How lenders size an aircraft cash-out refinance
The formula is simple. The inputs are where owners get surprised.
Maximum new loan = appraised value × maximum LTV. Cash available = maximum new loan − payoff − closing costs.
- Appraised value is usually as-is value today, not what you paid and not what the airplane will be worth after the work.
- Maximum LTV depends on the lender, the aircraft's age and the loan size. For purchases, AOPA Aviation Finance lists minimum down payments of 15% for post-1960 singles, 20% for pre-1960 aircraft and 15–30% for twins. AOPA also notes that an older aircraft may be financed only up to 70% or 75%. Cash-out limits are often at or below purchase limits, so confirm the figure for your airplane before planning a project around it.
- Closing costs are usually rolled into the new loan, and they come out of your cash.
Worked example: how much cash at each LTV limit
A 1970s Cessna 182 Skylane (Continental O-470) appraises at an assumed $240,000. The payoff on the existing loan is $110,000, and assumed closing costs are $2,500.
| Lender's max LTV | Maximum new loan | Cash available after payoff and costs |
|---|---|---|
| 70% | $168,000 | $55,500 |
| 75% | $180,000 | $67,500 |
| 80% | $192,000 | $79,500 |
| 85% | $204,000 | $91,500 |
The owner's avionics shop has quoted $55,000 for a panel upgrade. That needs a $167,500 loan, or 69.8% of value, so it fits even under a 70% cap. At the same value, a lender capping this airplane at 70% could not also fund a paint job.
What happens to the payment: worked example
The existing loan is at 8.50% with 10 years left, so the payment is $1,364. A lender quotes 7.75% on the new $167,500 balance (illustrative rate).
| Option | Loan amount | Monthly payment | Change vs today | Total interest on new loan |
|---|---|---|---|---|
| Keep current loan (no upgrade) | $110,000 | $1,364 | – | – |
| Rate-and-term only, 10 years | $112,500 | $1,350 | -$14 | $49,514 |
| Cash-out, 10 years | $167,500 | $2,010 | +$646 | $73,721 |
| Cash-out, 15 years | $167,500 | $1,577 | +$213 | $116,295 |
Keeping the 10-year payoff date costs $646 more a month. Stretching to 15 years holds the increase to $213, but adds five years of payments and $42,573 of extra interest. An avionics panel should outlast the loan either way. A paint job or a mid-life engine will not look the same in year 15, so be careful about financing short-lived items over long terms.
The blended-rate test: what the new money really costs
A cash-out refinance does two things at once: it borrows new money, and it reprices your existing balance. To see the true cost of the cash, treat the increase in your monthly payment as the price of the cash you receive, and solve for the interest rate that makes those match.
| Existing loan rate | Current payment | Cash-out payment (10 yr, 7.75%) | Extra per month | Effective rate on the $55,000 |
|---|---|---|---|---|
| 8.50% (Example A) | $1,364 | $2,010 | $646 | about 7.3% |
| 5.00% (Example B) | $1,167 | $2,010 | $843 | about 13.7% |
Example A: the owner's current rate is above today's quote. Repricing the old balance saves money, so the new $55,000 effectively costs about 7.3%, less than the quoted rate, even after $2,500 of costs. A cash-out refinance is the efficient way to fund the upgrade.
Example B: the owner locked 5.00% when rates were low. Repricing $110,000 up to 7.75% is expensive, and the cash effectively costs about 13.7%. In that case, compare alternatives:
- Keep the low-rate loan and pay cash for the upgrade if reserves allow. Keep enough on hand for the next annual and an engine reserve.
- Keep the low-rate loan and finance the upgrade separately. At an assumed 9.50% over 10 years, a separate $55,000 loan costs $712 a month. Combined with the existing $1,167 payment, that is $1,878 a month, versus $2,010 for the cash-out, before any fees on the separate loan. See avionics upgrade financing and engine overhaul financing for dedicated options.
- Wait. If the upgrade is optional, compare today's quotes again later. When to refinance an aircraft loan covers the signals to watch.
Want numbers for your specific aircraft?
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Overhaul, panel or paint: how each use affects the deal
| Use of cash | Effect on value | Lender considerations |
|---|---|---|
| Engine overhaul | A run-out engine depresses as-is value, so cash-out capacity is lowest exactly when you need it. After the overhaul, value typically recovers, but rarely by the full invoice. | Some lenders pay the engine shop directly and want the work order. Get the shop's quote, core-charge terms and timeline before applying. See SMOH and TBO. |
| Avionics panel | Modern IFR panels tend to help marketability, but the value added is usually less than the installed cost. | Lenders may want the signed shop quote and equipment list. Update insured hull value after installation. |
| Paint and interior | Improves presentation and saleability; the value added is modest and fades with use. | Shorter-lived improvement, so keep the financing term short. |
One sequencing tip: if the engine is near TBO and you plan to sell within a few years, get a pre-overhaul valuation. Then compare the cost of overhauling and selling against selling as-is. The cash-out math only matters if the project makes sense on its own.
Before you apply: cash-out checklist
- Payoff letter from your current lender, and the prepayment terms in your current note.
- A realistic value estimate: recent comparable sales plus logbooks, damage history and engine time.
- A written shop quote for the project, with scope, price, downtime and warranty.
- Your target LTV after cash-out, checked against the lender's cap for your aircraft's age.
- The blended-rate test above, run on your real numbers.
- An updated insured hull value that reflects the upgrade, with the new lender named as loss payee.
- A CPA's view on interest and depreciation if the aircraft has business use. As of September 2026, 100% bonus depreciation is permanent for eligible property acquired after January 19, 2025. Whether and how that applies to an upgrade depends on your facts, so confirm with a CPA.
How this guide differs from related guides
This page covers cash-out refinancing: borrowing against equity to fund work on the airplane. For the general refinance process (documents, costs, timeline and break-even), see how to refinance an aircraft loan. For timing a refinance in the current rate environment, see when to refinance an aircraft loan. To run your own numbers, use the refinance calculator.
Sources: down payments, age guidance and rate range from AOPA Aviation Finance; older-aircraft LTV from AOPA (Oct 1, 2024); bonus depreciation from IRS. Values, quotes and rates in the examples are assumptions for illustration.
Frequently asked questions
How much cash can I take out of my airplane?
Roughly appraised value × the lender's maximum loan-to-value, minus your payoff and closing costs. On an airplane appraised at $240,000 with a $110,000 payoff and $2,500 of costs, a 75% limit leaves about $67,500 and a 70% limit about $55,500. Limits vary by lender, aircraft age and loan size.
What is the difference between a cash-out and a rate-and-term aircraft refinance?
A rate-and-term refinance replaces the existing balance, plus closing costs, to get a better rate or a different term. A cash-out refinance borrows more than the payoff and hands you the difference, usually for an overhaul, avionics, paint or interior. Cash-out loans raise the balance and LTV, so some lenders apply tighter limits or price them differently.
Will a lender use the value after my upgrade or the value today?
Most lenders size the loan on current, as-is value. Some will consider a post-completion value when you provide a signed shop quote and the lender pays the shop directly, but practices vary and upgrades rarely add their full cost to market value. Ask how the lender will value the airplane before you order the appraisal.
Is a cash-out refinance cheaper than a separate avionics or overhaul loan?
It depends on your current rate. A cash-out refinance reprices your whole balance. If your existing loan is above today's quote, repricing helps and the new money is cheap; in our example the effective rate on the cash is about 7.3%. If your existing loan is well below today's quote, repricing costs you, and the effective rate can exceed 13%.
Can I get a cash-out refinance on an older aircraft?
Often, yes. AOPA Aviation Finance says its lenders have no age restrictions on piston aircraft, but aircraft built before 1960 may need a larger down payment or shorter term. AOPA also notes an older aircraft may be financed only up to about 70% or 75% of value, which directly limits how much cash you can take out.
Is the cash from an aircraft refinance taxable?
Loan proceeds are borrowed money, not income. Whether the interest is deductible, and how an overhaul or avionics upgrade is capitalized or depreciated, depends on how the aircraft is used and owned. Business-use owners should confirm treatment with a CPA or aviation tax adviser before closing.