Building a pool is a very sizable investment. In general, you’re looking to spend anywhere between $30,000 to upwards of $70,000 on the project, depending on type, size or other defining features of a pool. Naturally, not many people have this much cash on hand, therefore, paying for a new pool can be quite challenging.
That begs the question – can you finance a pool? The answer is both short and simple – yes, you can. Look at the pool as a home improvement investment. You can easily secure a loan, a number of ways, for any kind of home improvement project. When it comes to pools, there are several financing options for you to consider and since it can be somewhat difficult to choose the right one, we’ve decided we’re going to break them down for you, outline their pros and cons, so that you can make a sound decision when the time comes.
1. Cash-out Refinance
Cash-out refinancing is virtually just replacing your old mortgage with a new one, under the new terms. By doing so, you can even strike a better deal, meaning you’d end up with a lower interest rate or some other benefits. Your home equity will play a large role in this whole process. There is even an option for you to get cashback upon refinancing if you have enough equity in your home.
A cash-out refinance can be beneficial for any expense you might have, including the costs of building a new pool. The most obvious benefit of this option is that you can borrow up to 80% of your home’s equity, which could amount to a lot of money if you’ve already paid out most of your mortgage. This is the best option for those that have a lot of equity in their homes, especially due to low interest rates.
On the other hand, those that don’t have a lot of equity can’t really benefit from this method, as there simply isn’t enough money for them to borrow. Another drawback of this type of loan is the fact that it is a secured loan, meaning you could lose your assets if you fail to repay it. Finally, you will have to factor in the closing costs which could amount to up to 5% of the total loan amount.
HELOC, or a home equity line of credit, is something along the lines of a credit card, only it is secured by your home’s equity. It’s a revolving line of credit if you will. If you have enough equity in your home, a HELOC could be a great financing option for building your pool. The best thing about a HELOC is the fact that you can withdraw just as much as you need and you’d only pay interest for that amount of money.
To put in simply, you might have $200,000 in your home’s equity and if you take out a HELOC and you borrow $40,000 – you’d only pay interest for that amount. Furthermore, the interest rates for HELOCs are fairly reasonable, so that’s also good to hear. Additionally, some of the “home improvement” HELOCs can even turn out to be tax-deductible, which means you could save some extra cash in the process. If you’ve paid off your mortgage, this could very well be your best pool financing option.
The downsides of HELOCs is that by taking them, you’re increasing your mortgage balance, which could pose a risk in the future, seeing how this is also a secured loan, covered by your home. Additionally, the interest rates for HELOCs aren’t fixed, but according to www.localpools.com.au, you could use a pool financing calculator to help sort out the financing and variable interest rates.
3. Home Equity Loan
Similar to HELOC, a home equity loan is another method of borrowing money against your home’s equity. Unlike HELOC, a home equity loan does not work as a revolving line of credit, instead, you borrow a one-time, lump sum of cash that you can use for whatever – including covering the costs of building a pool. Unlike HELOCs, a home equity loan comes with a fixed interest rate, therefore, you shouldn’t have any issues predicting your monthly payments and sorting out your finances.
Also, the interest rates are lower than the ones you would get for a personal loan or a HELOC. Once again, the interest rate on a loan like this could be tax-deductible. This is also a solid option for those who have repaid their mortgage. The only real downside, other than the fact that this is a secured loan is the fact that a loan like this comes with a closing cost.
4. Home Improvement Loans/Personal Loans
Home improvement loans or personal loans are unsecured loans that you can take out and finance your pool or anything else for that matter. These are a solid option for those that don’t want to use their house as collateral but would rather take out an unsecured loan. To make this one a viable option, or even a possible one, you will need a good credit score, otherwise, you’ll be either rejected or stuck with horrible interest rates.
These are quite fine in a way that it is rather simple and easy to get a loan like this. The application process is simple and in most cases, you’ll get the necessary fund within a week. Considering that this is an unsecured payment, you are not subject to foreclosure even if you can’t repay the loan.
However, this “freedom” comes at a cost. The interest rates of personal, home improvement loans are significantly higher compared to the home equity loans, HELOCs or cash-out refinancing, mostly due to the fact that there is no collateral.
If we’re being honest, these aren’t something we’d recommend you do if you have other options, because, in the long run, you end up repaying a lot more than you would if you went the other route. What you can do, however, is shop for the best interest rates among different banks and lenders, but we wouldn’t expect any drastic changes, as your credit score is mostly what will dictate your interest rate.
As you can see, even if you don’t have cash on hand, but you want to build a pool – you can. These four are the main financing options for you to consider, although there are probably a few others, only not as good as these ones. Hopefully, you’ve found this helpful.