It’s no secret that swimming pool loans have become popular with homeowners across the country looking to maximize good living and property values. Many homeowners are unaware of the many secure and unsecure financing opportunities available today in the United States.
How to Get the Best Swimming Pool Loans
Many people love to have a swimming pool in the backyard to relax and enjoy the sun and family. Others enjoy having the pool for exercise But the cost of an inground pool can be $50,000 or more, so what should you do? However it depends on where you live and what the cost of construction is in your region. For example, the average swimming pool in San Diego, California might cost nearly $100,000, whereas the cost in Dallas, Texas averages close to $50,000.
Many Americans decide to finance their purchase with a swimming pool loan. When considering installing a new swimming pool, be pragmatic and considering all methods of payments, between loans, mortgages and cash.
Below are the details you need to know to finance your dream swimming pool, jacuzzi spa, sauna and more.
Refinancing for Cash Back
The most frequent way homeowners finance their pool is to do a cash-out refinance of their home. With interest rates so low in 2021, you might be able to refinance your loan at a lower rate and pull-out cash to pay for your pool.
You can use the cash you pull out of your home for virtually any purpose, including consolidating debts and making home improvements. If you use the money to pay for a pool, which is a home improvement, you may be able to write the interest off on your tax return – check with your CPA.
On the plus side, you may be able to borrow up to 80% of the equity in the property. If you have owned your home for years and are seeing a rise in value in the current hot market, you may have plenty of equity to tap. (Read today’s rules for cash out refinances.)
However, you should consider these aspects of doing a cash-out refi for your pool:
- Refinances mean you have to go through another mortgage application and approval. This means giving the mortgage lender information about your income, and your FICO score needs to be good enough to qualify for the new mortgage.
- Refinancing means you are starting the loan over. Whether you want to do this after pay – say, 10 years – on a mortgage is a complex question.
- Refinancing involves closing costs between 2-5% of the mortgage amount. Your mortgage balance will rise when you do a refinance, which will increase your monthly payment.
- If you can’t pay the loan, you lose your home.
The next option is to take out a home equity line of credit or HELOC to pay for your pool. A HELOC, like a cash out refinance, taps your home equity to pay for things you want.
A HELOC is like a credit card that may allow you to access the credit you need to pay for your inground pool. Then, you can pay the money back over time.
The biggest advantage of a HELOC is how much you pay every month depends on the amount borrowed. Plus, interest rates on these loans tend to be low at first but can rise over time.
We are currently in a low-interest rate environment so you may be able to pay for this at a low rate for now.
Another benefit is you can re-use this line of credit when you pay it off. And if you use the money for a home improvement, it may be tax deductible. And the approval process is faster than a cash-out refi.
On the downside, consider these points:
- HELOCs have variable interest rates. So, if you are risk averse, you may be uncomfortable with this loan because you don’t know for sure what your payment will be in a few years.
- You will have a higher loan balance that you must pay or lose your home.
- If your credit changes, you could have your HELOC closed without your consent.
Home Equity Loan
Your third option to finance your pool is a home equity loan, which allows you to borrow up to 80% of your equity. The advantage over a HELOC is it has a fixed rate and payment, so you know what you will be paying until the loan is paid off.
The rates are usually higher than a HELOC, but not always. And they are fixed. The approval for a home equity loan may be faster than a cash-out refinance.
The disadvantage is this loan comes with closing costs that are similar to a cash-out refinance. You also can lose your home if you don’t pay. Compare Constructions Loans to HELOCs
More on Pool Loans
The last kind of financing is a pool loan that isn’t based on your home’s equity. This is simply a personal loan that isn’t backed by an asset. You can shop for a pool loan at your bank, credit union, or other financial organization.
After you have been approved, you will get the approved amount in a lump sum to pay for your new pool.
The advantage of a personal loan is you can get approved faster than for a secured loan. You also should be able to do the application faster and get funding within a week.
Also, the lender cannot foreclose on your home if you don’t make the payments.
However, you will pay a much higher interest rate because the loan isn’t backed by property.
To get the lowest-cost loan, you should compare several pool loan quotes to get the best deal.
Unsecured Swimming Pool Financing
If you don’t want to take out equity to pay for your pool, you can apply for a variety of non-secured loans. There are pool loans available with various interest rates, depending on your credit.
These unsecured loans will have higher payments than a second mortgage but can be a smart choice if you are leery about securing a loan with your home.
Hopefully, you understand more about swimming pools and home values, and now can move ahead with your purchase!
Is It Smart to Finance a Pool?
This is a complicated question, and you need to consider several aspects. Pool financing could be for you if you really value having a pool but cannot pay for it in cash. It also can be smart to finance even if you have the cash so you can use your funds for something else. Financing a swimming pool should certainly be considered before paying cash.
If you can get a loan with favorable terms, it may be the best thing you ever did. Where you need to think about it is if you are looking at a loan with a high interest rate.
At that point, you should evaluate how much you will use the pool and what it means to you and your family.
Also remember that if you get a loan based on your home’s equity, you may lose your home if you don’t make the payments.
The good news is there are many ways to pay for a pool without emptying your savings account. Talk to your bank or lender about the options mentioned above to decide if financing a pool is a good choice.
Does a Swimming Pool Raise the Value of your Home?
Many homeowners want to add a pool to their backyard, especially when it’s hot outside. But does putting in a pool add value to your home?
Let’s take a look!
How a Pool May Increase Home Value
If you look at homes for sale, you’ll usually see higher prices for homes with an inground pool. This makes sense; the typical cost of installing a pool is $50,000 or more, so the home will have a higher value.
Many real estate agents note that more homebuyers seek a pool with their home because of COVID-19. More of us are spending time at home and can use the pool in the backyard for entertaining, relaxing, and having fun.
Realtors in the south say adding a pool in Florida or Texas also can add value to the property and make it easier to sell your home. For example, high temperatures in south Texas from June through August are about 90 F.
Many Texans love to have a pool in the backyard so they can be outside but stay cool.
Homes in more expensive neighborhoods also tend to have higher values with a pool.
How Much Will the Pool Add to The Home Value?
Experts have various opinions about how much value a pool adds to the home. One study by HouseLogic says you can expect an average increase of 7%. Another by HGTV says your home will increase in value by 5-8%.
Redfin also has done an analysis that shows in 19 hot-weather cities that a swimming pool may add between $11,000 and $90,000 to your home value. Obviously, this is a wide range and much depends on the type and size of pool, as well as the neighborhood and region.
If you live in a city that doesn’t have many pools, you may see a higher home value because it’s unusual.
Also, areas with have a heavy population of children may see the most need for pools.
Of course, having a pool doesn’t necessarily increase your home value. If your pool isn’t maintained and clean, it can drag down the value. It also can make people less likely to view it when you post it for sale.
If you are thinking about putting in a pool, it often is a good investment. But you should talk to a real estate agent who is familiar with your neighborhood. She can run comps and let you know if adding a pool of a particular value will raise your home’s value.
You also can pay an appraiser to value your home to see if the pool will increase its value.
Home Refinance with Cash Back
Interest rates remain low in 2021, so you may want to refinance your mortgage to a lower rate and pull out some equity. You could have a lot of equity in your home because homes have been quickly rising in value across the US.
The mortgage approval process can take longer to do a cash-out refinance, but you should be able to get approved if your credit is in the 680 to 700 range.
HELOC Loan for Home Improvements
A home equity line of credit is a great option to finance your pool, too. This is a second mortgage that is a line of credit similar to a credit card. You can use as much or as little of the credit line as you want, but you only pay interest on what you use.
HELOCs have a variable interest rate most of the time, but your payments can rise over time.
A home equity loan is also a second mortgage but unlike a HELOC it has a fixed interest rate and set payment schedule.
You can get part of your equity in a lump sum to pay for your pool. Compare 2nd mortgage loan for making home improvements.
Financing a Pool and Spa
Because a pool often increases a home’s value, many homeowners want to move ahead with having a pool installed. Most of us don’t want to spend $50,000 cash to build a pool, but there are several ways you can finance a swimming pool or spa. Whether you choose a secured or unsecured loan or pay cash, we suggest discussing your pool finance plans with tax consultant, trusted mortgage lender and financial advisor.