A swimming pool is a large investment, especially an inground pool. Can you finance a pool? Yes. When you consider how to finance a swimming pool, there are several options. But first, you will need to understand the basics of pool ownership and lending opportunities.
How Much Pool Can You Afford?
To explore financing options, you will need to determine how much pool you can actually afford. Pool costs are much more than just installation. You need to consider ongoing maintenance, increased utility costs, insurance premiums, and more. The average inground pool costs between $25,000-50,000 to build. Consider this your base price as you look at ways to finance a pool.
Beyond that, as the size of the pool increases, so does the price (roughly $50 per square foot). Depending on where you live, the price of the building permits and the pool itself will vary. In addition to these costs, you will need to consider landscaping, fencing (which is usually required), and any extra pool features you may want. It is very easy to see an invoice as big as $100,000 for a luxury pool.
Ultimately, the true answer to the question, “Can you finance a pool?” is determined by your current financial situation and credit.
Swimming Pool Finance Options to Consider
How To Finance A Pool With Cash-out Refinancing
When you finance a pool in this way, you raise the principal on your mortgage to access the equity within your home. Here is an example of how it works:
- You have $100,000 left on your mortgage.
- You decide on a pool that costs $60,000.
- Your mortgage is recalculated at $160,000.
- Once you close, you get the money a few days later.
Pros of a cash-out refinance
- It leverages your home’s equity. You can borrow as much as 80 percent of it. Many homeowners get all the money they need for a pool with this option.
- You can simultaneously drop your rate if the interest rates are currently low. The Freddie Mac Primary Mortgage Market Survey (PMMS) indicates the average lender rates for refinancing.
- You can change your mortgage in the process (e.g., lengthening or shortening its term).
Cons of a cash-out refinance
- Your monthly payment will typically rise.
- You have to prequalify for another mortgage.
- There are closing costs.
How To Finance A Pool With A Second Mortgage
Another popular way to finance inground pools is through second mortgages. There are two types: a home equity loan or a home equity line of credit (HELOC).
This option won’t work for everyone. It takes a while for substantial equity to be established in a home, so homeowners who have not owned their home for at least six years will have trouble qualifying. If you are considering a second mortgage, establish the amount you’re qualified before hiring a pool contractor.
Pros of a home equity loan
- This option is often less expensive and speedier than a cash-out refinance.
- Often the interest rate and monthly payments are fixed, making it more predictable than a HELOC.
Cons of a home equity loan
- Although they are not as substantial as those for a cash-out refi, you still have closing costs.
- You are assuming risk: missing payments could result in losing your home.
Pros of a HELOC
- Whatever is withdrawn from the HELOC is the only amount that incurs interest.
- The withdrawn amount is also what determines monthly payments.
Cons of a HELOC
- Typically a HELOC has a variable interest rate.
- Your home is used as collateral. Beyond increasing your mortgage balance, it increases your risk.
How To Finance A Pool With A Swimming Pool Loan (Unsecured)
There is a myriad of unsecured loans available for homeowners who have not yet established enough equity in their home. These loans are often called swimming pool loans since so many people use them to finance inground pools. Pool loans are only offered to homeowners with excellent credit who are willing to pay higher loan rates than a second mortgage might offer.
What credit score do you need to finance a pool with an unsecured loan? The lender is assuming the risk – the opposite of a home equity loan, in which the homeowner assumes the risk. Due to the risk that the financial institution incurs, a higher credit score is needed. Typically the minimum is set between 640 and 750.
Unsecured loans also carry higher interest. Rates vary but are usually around 14 to 18 percent. Additionally, unsecured loans have caps, and most lenders will not loan more than $30,000, which means that homeowners may need to come up with additional funds.
Pros of a swimming pool loan
- Unlike the other options, there is no threat of foreclosure because there is no collateral.
- Funds are released very quickly, often within a week.
Cons of a swimming pool loan
- Interest rates can get high.
- The amount of money you borrow may not cover the entire cost.
How To Finance A Pool With In-House Funding
In-house funding is essentially the same thing as an unsecured loan, except it is channeled through the pool company. At Olympus Pools, we offer hassle-free pool financing to help you design and build the pool of your dreams. Contact us to see if you qualify and begin your backyard transformation today.