Ahh, the quintessential summer lounge by the swimming pool – with sunglasses on, a lemonade in your hand and the occasional bark from your neighbor’s dog. ☀️⛱️
Pools can cost thousands to tens of thousands of dollars depending on what you want and where you live. So if you’ve longed for a pool in your yard but need financing to make it happen, we’ve got you covered like the sunscreen on your nose.
We’ve put together 5 ways you can finance a pool this summer and tips to help you make the best decision with your money. It’s summertime, and the livin’ is easy, so let’s dive in!
5 Ways To Finance a Pool
There are many pool financing options you can take advantage of including personal loans and home equity financing. Here are 5 of the main pool loan options, including some pros and cons for each, so you can compare them.
Home equity loan
A home equity loan lets you borrow money against your home. The more equity you have in your home the more money you’ll likely be able to borrow. Equity is the difference between the appraised value of your home and the amount you owe on your mortgage. You receive the funds in a lump sum with your home serving as collateral and repay the loan in fixed payments over time.
Qualifications for this loan will vary by lender. To set your loan terms, they’ll look at your credit scores, income and your combined loan-to-value (CLTV) ratio. Since this loan is considered a second mortgage, you’ll have to pay closing costs again.
The approval process can take 2 – 6 weeks. So as with most home equity financing, allow enough time to get your swimming pool loan approved before you start making installation plans.
PROS of a Home Equity Loan👍
Having a fixed monthly payment can make these loans easier to budget and manage.
Having a fixed monthly payment can make these loans easier to budget and manage.
Home equity loans usually have lower interest rates than personal loans or other unsecured loans.
It may be easier to qualify for a home equity loan over a personal loan because the credit and income requirements are usually lower.
CONS of a Home Equity Loan👎
A home equity loan is a second mortgage, so you’ll have to pay closing costs again.
Lenders like you to have at least 15% – 20% equity in your home before becoming eligible to take out a home equity loan. Depending on how large your mortgage is, how much you pay every month and how long you’ve been making payments, it could take a few years to start building enough equity in your home.
Your home is the collateral attached to this loan. So if you default on your loan you risk losing your home.
Home equity line of credit
A home equity line of credit (HELOC) is an adjustable-rate loan that lets you borrow money against your home with revolving credit (similar to a credit card). You borrow money during the draw period and make “interest-only” payments, then repay your remaining balance during the repayment period. You only pay interest on what you borrow, and variable rates can start lower than those on home equity loans.
Like home equity loans, lenders will look at your income, credit score and CLTV to see if you qualify. The approval process is very similar to a home equity loan as well, and both are considered a second mortgage with closing costs.
PROS of a HELOC👍
A line of credit can be a better financing option than a loan because you can borrow money as you need it. This is good for unexpected expenses during pool construction.
It may be easier to qualify for a HELOC than a home equity loan or a personal loan because the credit and income requirements are usually lower.
CONS of a HELOC👎
Most HELOCs have variable interest rates, meaning your monthly payments can change without warning. This can make it hard to budget for and manage your payments.
Just like home equity loans, lenders like borrowers to have at least 15% – 20% equity in their homes before they are eligible to take out a home equity line of credit.
Your home is the collateral attached to this loan so if you default on your loan, you risk losing your home.
A cash-out refinance lets you leverage the equity in your home to get a new mortgage (larger than your old one) based on the value of your home and turn some of that equity into cash. The more money you’ve paid off on your current mortgage, the more money you’re able to borrow. You’ll pay off your old mortgage with the new one and pocket what’s left for your pool purchase.
With a cash-out refinance mortgage comes a new interest rate and repayment terms. Lenders will look at your income, credit score and debt-to-income (DTI) ratio to see if you qualify. With this option, you’ll need to have at least 20% equity in your home, and you’ll pay closing costs again.
PROS of a Cash-Out Refinance👍
Instead of having two mortgage payments like with a home equity loan, you’ll have one monthly payment.
A cash-out refinance can often have lower interest rates than a home equity loan, and you may be able to get a lower interest rate than your current mortgage.
It may be easier to qualify for a cash-out refinance than a personal loan because the credit and income requirements are usually lower.
CONS of a Cash-Out Refinance👎
The approval process can take 6 – 8 weeks, and you may have to wait a few additional days after closing to receive the funds.
You’ll pay higher closing costs with a cash-out refinance because you’re taking out a new larger mortgage. And since you’re borrowing more money than your current mortgage is worth, your monthly payments will likely increase.
Lenders like borrowers to have at least 20% equity in their homes. This also means your home serves as the collateral for your loan, so if you default your home may be taken.
You may be able to take advantage of a personal loan to finance a pool. Most of these pool loans are unsecured loans, meaning they don’t require collateral. You’ll receive a lump sum and repay it in fixed monthly payments over time.
Lenders will look at your income, credit scores and DTI to see if you qualify. If you don’t qualify for an unsecured loan, you may need to get a co-signer or apply for a secured loan.
PROS of Personal Loans for Pools👍
Personal loans are likely the fastest financing option. You may receive the money in as little as 24 hours or a few days.
Since unsecured personal loans don’t require collateral, this can be a good option if you don’t want to risk losing your home if you default.
CONS of Personal Loans for Pools👎
Unsecured personal loans usually have higher qualifying standards than home equity financing and may be difficult to get with bad credit.
Unsecured loans usually have higher interest rates than home equity financing because the loan isn’t backed by collateral.
Pool retailer financing
Some pool retailers and installers offer financing options by partnering with select lenders. You’ll likely be getting an unsecured personal loan, so this option comes with many of the same pros and cons. The catch here is that your interest rates and fees will likely be higher.
However, just like car dealerships that offer special financing deals for buying cars, you may find pool retailers offer special financing deals or discounts when you finance through their partnered lender. This could make it a more attractive option than getting an unsecured personal loan on your own.
Tips for Financing a Pool
Now that you know your financing options, we’ve put together some easy-breezy tips to help you make the best decision for your new pool.
Understand your budget 💲
Putting in a pool can be really expensive – costs can depend on what you want and where you live – not to mention the maintenance costs involved with keeping it sparkling clean. Figure out how much money you can afford to put toward financing your pool purchase and the upkeep.
Get quotes from retailers for pool and equipment costs and contractors for installation costs to see which kind of pool is in your budget and how much financing you need.
Compare your financing options 📊
Once you know how much you’ll need, compare your loan options. Look at the qualifying requirements for each type of financing and see which one fits your needs. Once you settle on the kind of loan you need, compare different lenders by looking at the interest rates, fees and repayment terms for the amount you need to borrow.
Some lenders offer the option of becoming prequalified. This can help you check if the loan terms and monthly payments fit your budget.
If you have a lot of equity in your home, you may be able to borrow more money using home equity financing than a personal loan. But if you don’t have enough equity, a personal loan may allow you to borrow more.
Save money 🐷
Putting in a swimming pool doesn’t have to break your piggy bank. Find ways to save money where you can:
- An above-ground pool can cost significantly less than an inground pool. You’re looking at a few thousand dollars compared to $50,000 or more. But an above-ground pool might mean you’ll also need a deck, so consider that when making your decision.
- Look at the project materials and the features you want to install to see if you can make some compromises. A vinyl pool can cost less than a concrete pool. And do you really need the waterfall feature?
- Putting a larger down payment on your loan or paying some cash upfront results in you needing to borrow less money. This can keep you from paying more in interest over the life of your loan and save you money.
No (Belly) Flop Financing This Summer
Turning your backyard into a dream pool oasis can be expensive, but it doesn’t have to be as painful as a belly flop. There are financing options available to help you swan dive right into summer.
Once you get approved for the financing you need, make your payments on time every month and you’ll be happily swimming for years to come. 🏊