As the heat of summer settles in, many homeowners begin to dream of having their own swimming pool to enjoy. Pools can add a lot to the backyard! From cooling off in an in-ground to hosting pool parties, there are a lot of plus-sides. Far from being out of reach, there are many financing options available.
Pool Costs and Considerations
Of course, before you even consider financing options, you need to have an idea of the costs you can expect. According to HomeAdvisor, in-ground pools can cost anywhere from $20,000 to $100,000 or more. The average cost, however, is $40,000 to $50,000.
There are a lot of factors that contribute to the overall cost of an in-ground pool installation, including:
- Pool size: Expect to pay between $50 and $125 per square foot of pool. Obviously, the larger the pool is, the higher the cost, as it requires more equipment, materials, and labor.
- Pool materials: The material you choose has a big impact on the final price tag. The most common materials are fiberglass, vinyl, and concrete. Fiberglass pools are quick to install, relatively low-maintenance, and durable, but because they come pre-made and delivered to your house, they are much less customizable. Concrete pools offer that high level of customization, and they are very durable. But they have a much slower installation time, require more maintenance, and have an overall higher cost of ownership. Vinyl liner pools have a low initial cost, but end up being more expensive over time as you need to continuously replace the liner.
- Heating and filtration: Pool heaters range from $1,500 to $5,000, and water filters range from $500 to $3,000. You should not skimp on heating and filtration systems, because they are working around the clock, and going for the cheapest option can lead to costly repairs and maintenance later.
- Pool extras: There are plenty of add-ons to choose from that will increase the cost of a pool, such as a diving board, a waterfall, a jacuzzi, pool covers, and more. You should also factor in costs of things surrounding the pool, such as a cabana, pool deck furniture, and more.
Your Pool's Effect on Home Value
Many people assume that a pool will immediately boost a home’s value—but it’s more complicated than that. In fact, sometimes having a pool makes it harder to sell your home. Pools require a lot of upkeep and maintenance, and not all prospective buyers want that.
A HouseLogic study suggests a home value increase of 7%, at most. There are some circumstances in which a pool is more likely to increase the value of your house, including neighborhoods where all of the other houses have pools, or a hot climate where the pool could be used all year round.
Pool Financing Options
Once you determine a rough estimate of the type and size of pool you want, you can start to look into how to finance the installation. Luckily, there are several different options.
If you qualify to borrow enough money at a favorable rate, this can be a good option. These loans are available from a variety of financial institutions, including credit unions, online lenders, local banks, and national banks. These loans can have good interest rates, but they are still typically higher than the interest rates of the other options below. In addition, loan lenders may have loan limits below the amount you need to borrow for your pool. It is important to shop around, as there is a wide variety in terms of requirements to qualify, loan limit, terms, interest costs, and fees.
Home Equity Loans
These loans, often referred to as a “second mortgage”, provide you with a lump sum at a fixed interest rate, with a typical repayment window of 10-15 years. The interest rates on these loans are usually lower than those for personal loans--and the interest may be tax-deductible. New IRS rules state that if the loan is used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” then the interest can be deducted. Be sure to consult a tax preparer to confirm that this applies in your specific situation.
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit that lets you borrow money using your home as collateral. The lender will use your home’s appraised value, minus what you still owe on the mortgage, to help determine your credit limit. Once approved, you receive a set of blank checks or a credit card to use for withdrawing funds. You can withdraw only what you need, and you only pay interest on what you withdraw, which helps to minimize interest. You will have a minimum required payment each month, which is determined by how much money you borrow.
One downside of HELOCs is the additional fees associated with the loan. These fees can include a new property appraisal, an application fee, and closing costs. Shop around multiple lenders to find the best deal and keep the price down.
A cash-out refinance is when you take out a new mortgage that is greater than the current outstanding balance. You will receive the difference between the old and the new loans as cash. For example, if you still owe $150,000 on a $400,000 house and you want to add a pool, you can take out a new loan for $200,000, and use that extra $50,000 to purchase a pool.
When you refinance, you’ll complete the entire mortgage approval process again. You will also have to pay closing costs, which range from 2% to 5% of the loan amount.
Because a refinance is essentially a new mortgage, be sure to lock down the lowest interest rate possible. If you’re not careful, the interest rate on your new mortgage may be higher than the rate on your previous mortgage, resulting in you paying more over time. If you already have a lower interest rate on your mortgage than the interest rate available today, cash-out refinancing might not be the best option for you. If you can get a new, lower interest rate—low enough so paying closing costs is worth it—you may be able to refinance, get a new pool, and enjoy lower interest over time.
Ready to Jump in?
Having a pool can create endless moments of relaxation and fun, enhancing your enjoyment of your home and providing some much needed relief from the heat. Consider the benefits of drawbacks of owning a pool, and whether or not you can truly afford it. Once you’ve decided you want to move forward, take your time in determining what financing option is best for you. The financial experts at Amplify are always ready to talk you through your options, so you can make the financial decision that’s best for you!