5 Ways to Finance a Pool (The First 3 Are Often Overlooked)

Some people are lucky enough to buy a home with a swimming pool and finance the whole thing with a regular mortgage.

But what if you own a home, want a pool, but don’t want to move and lose your 3% interest rate?

Some loan programs today let you finance swimming pool construction and keep your existing mortgage rate intact.

1. Contractor Financing

The first place you might check is financing offered by the pool contractor. It may have relationships with local and national lenders that specialize in this financing type.

Contacting a few lenders on the contractor’s list will save you time compared to searching for companies yourself.

The contractor will also have real-world feedback from homeowners about programs and local lenders with the best terms.

Pros:

→Loan recommendations based on experience
→The contractor already knows the ins and outs of requesting draws to keep the project moving

Cons:

→May only provide a few options
→Other lenders may provide better rates and fees

2. Pool Loan Broker

A quick Google search for pool loans will reveal companies with an interesting business model: pool loan broker.

Rather than offering the loans themselves, they take your application and match you with the best lender for your location and situation.

This could save some time and work applying with many different lenders.

Loan options vary, but include

• Unsecured loans, similar to personal loans

• Terms up to 30 years

• Fixed rates

• Loan amounts up to $200,000

• Available in all 50 states

These same lenders can also finance backyard living spaces, landscaping, outdoor kitchens, and more.

Funding can happen in as little as 48 hours, much faster than for a home equity loan or refinance.

Pros:

→Less time searching for lenders
→Wide variety of loan terms

Cons:

→Unsecured loans come with higher rates than loans secured against the house
→The lender you’re matched with may not be the best deal

3. Credit Card with a 0% Introductory Rate

Credit cards likely won’t work for projects costing $100,000 for instance: credit card maximums typically don’t go that high.

But they may work for smaller projects, pool repairs, or when you plan to pay cash for part of the project.

Some credit card offers are almost too good to pass up. Simply finance construction costs as you go and pay zero interest for up to 12 months.

But there’s a catch: If you still hold a balance after the introductory period, expect to pay interest rates up to 30%.

On a $25,000 balance, this could cost you $7,500 per year in interest alone.

Make a plan to pay it off well before you need to.

Pros:

→No interest if you pay it off during the introductory period
→Fast and easy to open the account and access funds

Cons:

→Potential for very high interest costs
→Could hurt your credit score if you use it up to the credit limit

4. Home Equity Line of Credit or Home Equity Loan

You can pay for a pool with existing equity in your home.

For example, you owe $250,000 on a $500,000 home. Home equity lenders often allow you to borrow up to 90% of your home’s value, or $200,000 in this case.

With a home equity line of credit, or HELOC, you pull money out as needed. Rates adjust with the prime rate. With a home equity loan, funds are issued all at once, but it comes with a fixed rate and regular payments.

Either way, you could pay less interest than when using an unsecured pool loan. Home equity loans are secured to your home, meaning there’s loan collateral and lower rates.

Unsecured pool loans are more like personal loans; they have higher rates.

Get quote for a pool loan and a home equity loan to compare terms.

Pros:

→Potentially lower rates than unsecured pool loans
→More lender options
→Does not affect your first mortgage rate

Cons:

→Your home can be foreclosed on if not paid
→Longer application and funding process than a pool loan

5. Cash-Out Refinance

A cash-out refinance lets you replace your existing mortgage with a larger one. You get the difference in cash at closing for any purpose.

For example, you currently owe $300,000 and you take out a new primary mortgage for $400,000 and get $100,000 in cash, less closing costs.

This was once a popular program. But it requires you to refinance into today’s higher mortgage rates. A cash-out refi could be a bad idea for homeowners with a current rate below about 6%.

A home equity loan may be a better choice.

Run the numbers: a cash-out refinance may work better for those with a low existing mortgage balance and needing a large amount of cash.

*Rates are for example purposes only and may not be available. **Assumes original balance was $200k.

Because this homeowner’s loan balance was so low, refinancing into a higher rate is less expensive than taking on a large home equity line or loan.

Check today's cash-out refinance rates.

Pros:

→Relatively low fixed rate versus a home equity loan or unsecured pool loan
→Potential to reduce your rate if rates are now lower than when you got your mortgage

Cons:

→You lose your low existing first mortgage rate
→High closing costs compared to home equity loans and unsecured pool loans

Which Pool Financing Option Will You Choose?

With so many options, the odds of finding the right financing fit are in your favor.

Speak to a professional to get more guidance on your best pool loan.