Private outdoor spaces have become even more popular during the coronavirus pandemic, and for many homeowners, a pool is a must-have feature. Construction for new in-ground residential pools jumped 21% in 2020 compared with the year before, The Escape Home reported, according to a spokesperson for the industry research group Pool & Hot Tub Alliance. Warm-weather states such as Arizona, Texas and Florida saw permits rise even higher, by 30%.
Pool prices range from a few thousand dollars to as high as $100,000, according to HomeAdvisor, which means you might need a loan — whether a personal loan, home equity line or something similar — before you can fulfill your dream of an outdoor oasis.
Why You Might Need a Pool Loan
Your need for swimming pool financing likely depends on whether you’re purchasing an above-ground pool or an in-ground one.
Prices for above-ground pools start around $1,200. Even with installation, upkeep and accessory costs, you might be able to pay with savings or via credit card.
In-ground pools, however, cost much more — prices start around $20,000 — and are likely to trigger the need for a loan. Building a pool often spurs the need for other outdoor projects, such as a fence around the pool and yard, a patio, pool house, new lighting and landscaping. You also need to plan for upkeep, which typically costs between $500 and $4,000 a year, depending on the type of pool.
Pool Installation and Maintenance Costs
There are three main types of in-ground pools: concrete, fiberglass and vinyl-lined. Concrete pools last the longest (between 50 and 100 years) and cost the most, with an average cost range of $35,000-$65,000, according to HomeAdvisor. Maintaining a concrete pool also costs the most, with annual costs ranging between $2,700 and $4,000.
Fiberglass pools have an average cost range of $20,000-$60,000 and last at least 25 years. This type of pool is the easiest to maintain, with annual costs ranging between $1,000 and $1,500.
Vinyl-lined pools need to have their liner replaced every 10 years, but they have the lowest up-front costs, with an average installation range of $20,000-$50,000. Annual upkeep costs range between $1,100 and $1,700.
Types of Pool Loans
There are a variety of ways to obtain swimming pool financing, including a personal loan, renovation construction loan, home equity line of credit or loan, and cash-out refinancing. Here are some of the best pool loan options , along with the pros and cons of each.
The fastest way to obtain cash from a loan is through a personal loan, where some lenders could approve your application in minutes and send money the same day.
[Read: Best Personal Loans.]
Personal loans are typically unsecured and not backed by something like a home or car. “We’re just underwriting the consumer, not the details of a purchase,” says Todd Nelson, senior vice president of strategic partnerships at LightStream, a personal loan lender. “There is lots of flexibility with a personal loan and lots of options.”
Personal loans range in size from about $1,000 to $100,000, with terms usually lasting from two to five years. Some lenders offer pool-specific personal loans with terms up to 12 years.
Once you get the money from your personal loan, you can pay the contractor or pool company in cash. This is a more streamlined process than a construction loan, which requires the lender to send payments to the contractor based on when different stages of the project are completed, Nelson says.
A potential downside to a personal loan is the interest rate. Traditionally, mortgage-based loans like home equity lines of credit, or HELOCs, and refinances have a lower rate than personal loans because they are backed by real estate.
“Because you’re the only person guaranteeing the loan, (personal loans) tend to be more expensive,” says Judith Lu, co-founder and CEO of Blue Zone Wealth Advisors in Los Angeles.
To get the best rate, you’ll need to make sure your credit score is high (at least 740), your income is consistent and you don’t hold too much debt already. The interest rates on pool loans for people with bad credit will likely be higher.
[READ: Best Bad Credit Loans. ]
Lenders might offer these project loans directly or through a contractor.
Some options allow you to take out the loan based on the future value of your home, after you add the pool. This could be ideal if you don’t have enough equity in your home to get a home-backed loan and might allow you to borrow more than you could for a personal loan.
Another possibility is getting a loan through a contractor that allows the lender to pay the contractor directly through each stage of the project.
But that option might not be as appealing to the contractor as someone who will pay in cash.
“It’s more work for them to have to document all these things and also get the approvals, which can drag out the production process,” Nelson says.
Make sure to compare the rates and costs associated with company- or contractor-based loans, to see if it’s more affordable to work directly with a lender.
HELOC or Home Equity Loan
A home equity line of credit is a revolving credit line secured by the equity you’ve built up in your home. The draw period for a HELOC is typically between five and 10 years, so if you already have a HELOC open, the quickest and easiest loan option is to tap your existing home equity line to pay for your new pool. A home equity loan is similar to a HELOC, but the loan is disbursed in one lump sum.
Even if you have to apply for a new HELOC or home equity loan, either could provide the funding you need, most likely with a low interest rate.
[Read: Best Home Equity Loans.]
“Your house is the collateral that is guaranteeing this loan,” Lu says. “As long as you’re in a position to afford the mortgage payments and home equity loan payments, it’s good.”
Before you pursue a loan that will become your second mortgage, make sure you have enough equity to cover the project. It’s likely you’ll be limited to tapping 85% of the equity in your home, which means you need more than a 15% difference between your existing mortgage balance and the home’s current value.
With a HELOC, your payments will reflect the amount you have taken out during the draw period. Some HELOCs have variable interest rates, which can be a problem if benchmark rates start to climb. The draw period (usually a maximum of 10 years) , is followed by a repayment period (usually a maximum of 20 years).
A home equity loan is similar to a traditional installment loan, with a fixed rate and consistent monthly payments. The term could stretch as long as 30 years.
Although HELOC and home equity loan rates are likely higher than mortgage rates, they are usually lower than personal loans because your home serves as collateral, while personal loans are usually unsecured. It might be possible for you to get a tax deduction for the loan or HELOC if you can show that the money was used to improve your home.
The application process for these loans is longer than it would be for personal loans, however. It could take a month for a lender to review and approve a home equity-based loan because the underwriting process — which could include an appraisal — is similar to when you took out the original mortgage, and might include closing costs.
There are more risks with home equity loans, too. Your home value could drop and be less than your original mortgage plus the equity loan, which is a problem if you are planning to sell. If you can’t keep up with the added loan payments, you’re also risking foreclosure.
With where interest rates are today, you can likely lower the rate on your mortgage and also take out enough money for the swimming pool project with a cash-out refinance. In this scenario, part of the refinanced loan pays off the original mortgage and the rest can be used toward the pool purchase.
“Taking a cash-out refinance of the mortgage is probably the first thing I’d suggest,” Lu says, because you can lower your current mortgage rate and get cash for whatever you’d like.
The cash-out refinance amount can usually total 80% to 90% of your home equity. The interest rate will likely be low, depending on your creditworthiness. A cash-out refinance isn’t a viable option if you haven’t built up much equity in your home.
It can take a month or more to complete the underwriting on a cash-out refinancing, however. You’ll also have to pay closing costs, which are typically 2% to 3% of the cost of your loan. Remember to compare interest rates and fees among lenders. Also, make sure you can afford the monthly payments on your new, larger mortgage.
[Read: Best Mortgage Refinance Lenders.]
Tips for Buying a Pool
Follow these steps before you pursue a swimming pool loan:
Do your homework. If you live in a community governed by a homeowners association, you’ll need to make sure you follow the rules concerning pool installation — if you can have one at all. Also, you’ll need to determine what type of pool you need based on the size of your yard and how much you’ll use it, and get estimates from multiple companies and contractors before you decide on the purchase.
Map out your renovation. Your pool installation project will likely include other outdoor improvements, possibly an outdoor kitchen or a gazebo to “bring that outdoor living concept to life,” Nelson says. Also, consider what you might want in the pool itself. You can get ideas from sites such as Houzz and Pinterest for features like water slides, fountains and dancing waters, Nelson says. Once you determine those costs, you can better estimate your loan amount.
Examine your financial plans. The purchase of a swimming pool — especially an in-ground one — should come after you’ve reviewed your finances, determined what type of loan you need and decided what your long-range plans are for the home. One way to do this is to figure out how much free cash you have to pay for a pool loan and ongoing maintenance and also plan for your worst-case financial scenario, Lu says.
“That way you can enjoy the pool when you’re in it and not worry about how you’re going to pay for it,” Lu says.
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