Whether you’re cooling down, chilling out, or spending quality time with friends and family, a swimming pool is the perfect centerpiece for any outdoor space. But owning your own private backyard oasis comes at a price.
According to HomeGuide, a typical in-ground swimming pool costs anywhere from $80 to $250 per square foot to install, averaging between $25,000 in excess of $100,000. Even for those with that much cash on hand, it’s a lot to spend at once. That’s where pool financing options come in.
In this article, we cover the pros and cons of the financing options available when considering how to pay for a swimming pool, as well as what makes the pool financing process here at HFS Financial so easy and convenient.
Home Equity Loan
Simply put, a home equity loan allows you to borrow up to 85% of your home’s appraised value, using the equity you’ve built as collateral. Think of it as taking out a second mortgage on your home, including all the benefits that come with it – namely lower interest rates, tax-deductible interest, and longer loan periods.
A home equity loan could be a good option if you’ve built enough equity to cover the cost of your pool, but it also comes with drawbacks, especially if you miss payments or stop paying altogether.
Pros:
- Easy qualification
- Tax-deductible interest
- Longer loan periods of up to 30 years
- Lower interest rates
- Lower monthly payments
Cons:
- Lowers your equity (especially if you plan to sell your home)
- Two mortgages
- High upfront costs, such as closing fees, appraisal fees, title searches, and more
- Failure to pay could result in a lien or foreclosure
Cash-out Home Refinance
Refinancing your home is a great way to lower your mortgage, but it can also be used to borrow money against your home’s equity.
Refinancing your home at a higher value means you can borrow the difference in a lump sum and pay it back in monthly installments, essentially rolling the cost of your pool installation into your mortgage.
Pros:
- Does not increase the number of loans in your name
- Allows you to take advantage of your home lender’s interest rate
- Gives you the option of a fixed or variable rate
- Tax-deductible interest
Cons:
- Lowers your equity
- Increases your mortgage
- Failure to pay could result in a lien or foreclosure
Home Equity Line of Credit (HELOC)
Think of a home equity line of credit as a credit card that uses up to 85% of your home equity as the limit. This allows you to borrow as much as is needed to cover the cost of your pool installation and pay it back as you see fit, adjusting the amount of money you pay per month as your budget allows.
This flexibility is attractive to those concerned about their monthly expenses or unforeseen financial changes. But, if you don’t manage your finances closely, that flexibility can become a double-edged sword.
Pros:
- Flexible payment options
- Lower rates for lower payments
- Tax-deductible interest
- Requires relatively low credit and income requirements to qualify
Cons:
- Variable rates could result in a longer loan period
- Potential for foreclosure upon failure to pay
- Easy to fall behind with payments, resulting in increased debt
Pool Contractor Loan
With a similar process to the one used at car dealerships, some pool contractors offer pool financing options. Pool contractors often boast of low interest rates, deferred payment options, and other promotional perks. But, while a pool contractor loan may work to your benefit, pay close attention to the terms and conditions. Lower interest rates are often paired with longer payback periods, meaning that you end up paying far more for your pool than you might have otherwise.
Securing a loan through a contractor also limits your financing options, forcing you to finance through the lender they prefer. You’ll have no way to shop around and compare other pool loan options that may benefit you.
Pros:
- Low monthly payments
- Fast and inexpensive qualification process
- No collateral required
Cons:
- Long repayment periods
- Higher interest rates
- Interest is not tax-deductible
Personal Loan
A personal loan is one of the fastest and most convenient ways to secure pool financing. The process is similar to financing through a contractor, but instead of limiting your options, it puts you in control. With a personal pool loan, you can compare and contrast the financing options offered by different lenders, finding the interest rate to loan term ratio that best suits your budget.
If you need the money for your pool installation fast and prefer not to use your home equity as collateral, a personal loan could be perfect for you. However, as with any loan type, there are pros and cons to consider.
Pros:
- Fixed-rate loans help you budget accurately
- No collateral required
- Low upfront costs
- Lightning-fast qualification process
Cons:
- Interest is not tax-deductible
- Shorter repayment periods
- Higher interest rates
Are you interested in financing a pool installation? HFS Financial specializes in personal loans to cover all your home improvement needs. Our great rates, low monthly payments, and fast and easy qualification process ensure that our loan options remain the best way to finance a pool.
Contact HFS Financial today and let us help you secure your dream backyard oasis.