Many people don’t realize that they can finance a swimming pool with a home equity loan. While it will always be cheaper to pay cash for your new pool, there are a number of swimming pool financing options to consider. One way to save money on taking vacations is to have a vacation right in your backyard with your own in ground swimming pool. Below we describe some of the common swimming pool loans and financing methods for building a pool and spa in your backyard.
#1 Build a Pool with Your New Home
If you are moving into a new house, one way to get a new pool financed is to just roll that cost into the mortgage for your house. That way you are paying a relatively low payment for your new pool, along with your house payment. The pool loan will be spread over the life of the loan, dropping payments significantly.
However, be aware that if you have a 30 year loan, you could be paying for your pool for many years. Even with mortgage interest rates still a bargain at 4% or so in 2017, you could end up paying nearly double the $25,000 cost of a typical in ground pool in interest charges over the full life of the loan.
A better option for financing a new pool with a new house is to choose a 15 year mortgage so that you save tens of thousands of dollars in interest.
#2 New Pool with an Old House
The most common scenario is buying a new pool with your existing home. In that case, the most common pool financing option is to get a home equity loan or a home equity line of credit (HELOC) to pay for your new pool.
With both loans, you are tapping your home’s equity to pay for your new pool. With a home equity loan, you can pull out much of your home equity in a single lump payment to you. It features fixed interest rates and a fixed payment. The interest rate will be higher than a HELOC, but you know that the payment will stay the same; this is important for many borrowers. The home equity loan may be a good fit for your pool loan because you usually need one lump of cash to pay for the pool.
Or, you can get a home equity line of credit, which functions similarly to a credit card. You will be approved up to a certain amount, and you can draw it out whenever you like. Interest rates are variable with HELOCs; while you will likely have a lower rate initially than a fixed 2nd mortgage, note that the rate can and will go up. It can go up in the short term if interest rates rise. It also will go up eventually when the draw period ends. At that time, you must pay both interest and principal, which will hike the payment substantially.
If you do not have sufficient equity in your home to pay for your pool, you may need to get a personal home improvement loan. These pool loans are unsecured, meaning that you will need to pay a higher interest rate for a shorter term. For example, a $25,000 pool loan at 7.5% would cost $297 per month for 10 years, or $500 per month for five years. If you can handle the higher payments, go for the shorter term as you will save big on interest. Learn more about personal and home improvement loans to see which type of swimming pool financing makes the most sense for your needs.
One good thing about adding a pool to your home is that when it is done, experts recommend you have the property appraised again. In many cases, you will add substantially to the home’s value. It could make it worthwhile to refinance your pool loan along with your first mortgage into a new mortgage.
You may need to pay closing costs and points, but you will probably save over the long haul by dropping the pool loan rate to the same as your mortgage rate.
#3 Old Pool and Old House
Some people may have an old house and an old pool that they want to remodel. You may be able to pay for the remodel on the pool if you have equity, by using a HELOC or home equity loan. This is considered secure pool financing and the lien is secure by your house.
If not, your options are to either pay for it with a credit card or to apply for special pool financing for existing pools. The interest rates will usually be high – above 12%, but you will not need to mess with your other lines of credit, and you can usually pay only 2% of the balance each month. One of these lenders is called Aquavantage.
A credit card really is the last ditch option as the interest rate is usually very high. We would recommend that you only do this if your rehab of the pool is only going to cost a few thousand dollars.
The Bottom Line
Adding a pool to your home can really increase your enjoyment, as well as the value of the home when it comes time to sell it. You should be able to find a way to finance your new pool with the many options available.
Generally, we think that the best pool financing option is a home equity loan with a steady, fixed payment with a relatively low interest rate. But you may decide to opt for a HELOC or a home improvement loan.
Your options are greater if you have good credit and equity in your home. If not, you still may be able to finance your swimming pool and jacuzzi to minimize your out of pocket expenses.