Guide to Swimming Pool Financing

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Everyone wants to take a dip. 

Swimming pools are rising in popularity as more homeowners across the country are installing pools, while buyers are looking for homes with pools. In 2020, in-ground residential pools increased more than 20 percent from the previous year. 

Today, a house with a pool sells for an estimated $27,199 more than a comparable home without one, according to the National Association of Realtors. However, because pools commonly cost over $50,000 to install, they don’t exactly provide a great return on investment. 

Pro Tip

Always gather quotes from a few different contractors before settling on a company for the pool installation.

Installing a pool in your backyard, it won’t necessarily pay for itself if you eventually decide to sell your home. But if you are planning to do it, there are a few ways to pay for it ahead of the hot summer season. Due to current low interest rates for home mortgages, now might be a good time to consider financing a swimming pool.

What Is a Pool Loan and How Does It Work?

You may have seen banks and other lenders advertise something called “swimming pool loans” — these are usually unsecured personal loans that can be used for almost anything. 

Personal loans generally have higher interest rates than other financing options. So if you’re interested in financing a pool for your home, we recommend researching a few different types of financing first. 

No matter which financing option you choose, make sure you understand the full commitment, including all fees and costs, involved in the pool financing. Many financing options will require you to use your home as collateral—which means you risk losing it if you can’t pay back the loan. For a major purchase like a swimming pool, loan calculators can help you evaluate the cost.

Finally, you don’t want to find yourself overextending your finances for this backyard improvement. “A pool addition should enhance your life and lifestyle, without compromising your ability to comfortably cover critical financial obligations such as mortgage expenses, educational savings, retirement funds, car payments and other ongoing expenses,” said Todd Nelson, senior vice president of strategic partnerships at online lender LightStream.

Best Ways to Finance Your New Pool

Installing an in-ground pool is a big project, and many homeowners may not have the cash to pay out-of-pocket. If you’re looking to finance a swimming pool, there are a few different ways to go. 

Home equity loan 

A home equity loan allows you to borrow against your home equity. This is also known as a second mortgage. How much you can borrow depends on how much your home is worth and what you still owe on your first mortgage. This type of loan can be a good option if you have a high amount of home equity, but it may not work if you recently purchased your home.

“These loans often won’t provide enough financing to cover the full cost of a pool for new homeowners,” said Justin Goldman, CEO and co-founder of RenoFi, a financial services platform that partners with lenders to offer renovation loans. “Pools often cost $50,000 minimum depending on market, materials and size, so the average homeowner with a $400,000 home who’s paid off $80,000 so far could only get a $40,000 loan, assuming the bank’s maximum borrowing power is 90% of the current value.” This leaves the homeowner to cover the remaining cost, plus pay back the loan over time.

HELOC

A home equity line of credit, or HELOC, offers a more flexible way to borrow against your home equity. Instead of receiving a lump sum, like you would with a home equity loan, a HELOC is a revolving line of credit. Similar to how you would use a credit card, a HELOC lets homeowners borrow and use funding as they need it.

Cash-out refinance

A cash-out refinance is a type of home mortgage. You refinance your current mortgage with a new one that’s worth more than what you owe on the home. You get the cash difference back as a lump sum, which you can use to finance a pool. If you have enough home equity built up, this can be an affordable financing option. 

“If you’re already planning on refinancing, a cash-out refinance is a great option because it doesn’t require you to take out a second equity loan, just refinance your first mortgage. However, closing costs can be high, so make sure you’re refinancing into a lower rate,” said Goldman.

Personal loan 

These loans are generally unsecured, so you don’t have to worry about putting up your home for collateral. But because personal loans usually don’t require collateral, they also come with higher interest rates. You should at least check into other financing options for home improvements before settling on a personal loan. 

What to Consider When Applying for a Pool Loan

When applying for pool financing, your personal credit is the prime concern. The higher your credit score, the better interest offer you’re likely to receive. Many lenders offer the best terms for borrowers with credit scores in the mid-700s and higher.

The length of the loan term will depend on which method you choose for pool financing. But many lenders allow a term length of a decade or more. When you decide on the financing, make sure to account for all of the costs associated with the project.

“With any renovation, it’s important to know how much you have available to spend,” said Nelson. “With a solid budget in place, you can prioritize your project’s scope; make informed choices on how much you have available for construction labor, products and services; and determine how to fund the project in the most economically sensible way.”

It’s a good idea to overestimate expenses when budgeting. There are usually costs that you might fail to see when you’re in the planning stages. 

“Digging up your background to install a pool can affect groundwater management and plumbing,” said Goldman. “Many folks don’t account for permitting or surveys when creating their budget that could be required by their municipality.” You don’t want those hidden costs to catch you by surprise.

Pool Loans vs. Buying Outright

Financing a swimming pool will increase the cost of the project in the long-term. If you plan to take out a loan, making a sizable down payment will reduce the interest you pay over time, which means the overall cost of financing will be less. 

Once the pool is installed, you should also create a budget for repairs. “Don’t forget that yearly maintenance costs of pools add up. A loan can help pay for initial installation, but you’ll be shelling out thousands every year to keep it running,” said Goldman. The annual upkeep for swimming pools is expensive, so keep that in mind when you’re focused on your immediate summer plans.