THE TOP 5 WAYS TO FINANCE A SWIMMING POOL
Updated: April 2024
Have you thought about an inground swimming pool for your backyard? Designing and building an inground swimming pool is no small task. It takes planning and a lot of patience.
But one of the first things to consider is how you will pay for your new pool.
Our pool packages start at $95,000, but last year, in 2023, our average pool price was $140,000, which makes it a significant investment. We’ve seen an increase in most of the supplies and materials that it takes to build a pool, and that goes for any type of pool. (If you haven't read our article "How much does it cost to build a swimming pool in 2024," check it out here >)
Financing your pool can take some time to figure out, so it's a good idea to secure your funding or, at the very least, know how you will finance your pool and what the terms are that you qualify for ahead of time.
Due to the increase in interest rates, we have seen the majority of our pools funded with an unsecured personal loan or a combination of an unsecured personal loan coupled with savings.
Five of the most popular ways to finance your pool:
1/ Home Equity Loan
2/ Home Equity Line of Credit
3/ Cash-out Refinancing
4/ Unsecured Personal Loan
5/ Savings/ Assets
1/ Home Equity Loans
A home equity loan is a secured loan. This type of loan lets you borrow against the equity you've built in your home and can sometimes be referred to as a second mortgage. Essentially, you are taking out a second mortgage in addition to your original one, which means you now have two liens on your property. The loan amount is based on the difference between your home's current value and what you owe on your existing mortgage and is disbursed as a lump sum. Depending on the lender you select, home equity loans come with a fixed interest rate, a fixed repayment timeline, and a fixed monthly payment that does not change, and you can choose a loan term ranging from five to thirty years.
2/ Home Equity Line of Credit
A home equity line of credit (HELOC) is a credit line secured by your home, and most often, they are issued as credit cards or a checkbook. The amount of credit available depends on your home's equity, your credit score, and your debt-to-income (DTI) ratio. Because an asset secures a HELOC, they tend to have higher credit limits and much better interest rates than credit cards or personal loans. In addition, while a Home Equity Line of Credit usually has variable interest rates, some fixed-rate options are available. Expect a draw period followed by the repayment period. The repayment period can range anywhere from 10 to 20 years in length.
3 / Cash-Out Refinancing
A cash-out refinance is a mortgage refinancing option where you replace an old mortgage with a new one with an increased amount owed on the previously existing loan. The difference is paid to you in cash, enabling borrowers to use their home mortgage to get some cash. A lender will determine how much money you can receive with a cash-out refinancing based on bank standards, your property's loan-to-value (LTV) ratio, and your credit profile. With cash-out refinance, you usually have 15 to 30 years to repay the loan.
4 / Personal Loan
A popular option among pool loans is the tried-and-true personal loan. Personal loans are a type of installment debt that allows you to obtain a lump sum of funding at a fixed interest rate and a fixed repayment period. The money you borrow is repaid over time, typically with interest. So you'll have a regular monthly payment that will always stay the same.
Most personal loans are unsecured, meaning you don't have to put your home down as collateral to get approved. If you have very good or excellent credit — or any FICO score over 740 — you may even qualify for a loan with a fixed interest rate as low as 5 percent. Personal loans also often come with low or no fees, making them an inexpensive option compared to other loans, but it usually has a shorter repayment period. However, in the past year, we've seen 10-15-20-year terms.
Since interest rates have been increasing, this option, combined with savings, has become the most popular option.
5 / Savings
Another option is tapping into your savings (or other assets) to pay for your pool or part of it. However, most of the time, using a combination of cash and financing the balance to reduce monthly payments has proven to be a good solution for many.
In conclusion, every situation is different. You will need to determine which option works best for your situation. For example, you'll need to weigh the pros and cons of a secured loan vs. an unsecured loan. Your credit score will also come into play, and make sure you consider the loan's APR, repayment terms if there are fees, and the total repayment cost. If you decide that an unsecured loan is the best financing option for you, most lenders' have pre-qualification tools to get quotes and choose from their loan options. Lenders will ask for your personal information, including your social security number and employer, and you'll have to consent to a hard credit check. Then, you can apply online through the lender's website when you're ready to move forward. Once approved, the lender will send you a finalized loan agreement that outlines the loan's APR, repayment term, and total repayment cost. Sign the agreement and return it to the lender if you agree to the terms. The lender will disburse the funds by depositing them directly into your bank account. Usually, you can manage your account and make payments through the lender's website or mobile app.
Have questions about swimming pools or the process of buying a pool? Contact Us!