Americans are spending more time at home than ever before as a result of the COVID-19 pandemic and the shift to remote working for many, not to mention the number of families and individuals moving out of the city and into the suburbs.
And this means that we’re starting to think about what we want from our homes. What does that forever home really look like and what’s missing? For some homeowners, that’s a kitchen or bathroom upgrade, but for others, that means looking at the yard and thinking about how to make the most of outdoor space.
That could mean adding an ADU, or it might mean adding a little luxury such as an inground swimming pool. And in this guide, that’s exactly what we’re talking about.
We’ll help you to understand the different ways you can finance a pool and dive deep into the pros and cons of each. Given that most homeowners should expect to spend more than $50k, it’s important to choose the method that lets you borrow the money you need but that has the lowest possible monthly payments.
We’ll introduce you to RenoFi Loans, a new type of home renovation loan that lets you borrow based on the future value of your home after the construction of your pool has been completed, and take advantage of market rates, as opposed to the higher interest rates of many alternatives.
We’re here to help you finance the construction of your swimming pool as affordably as possible and see the limitations of traditional home equity loans and lines of credit, a cash-out refinance, or other methods of pool financing.
Specifically, we’ll look at:
Types of Pool Loans for Financing
If you’re borrowing $50,000 or more to pay for your swimming pool, you want to know that your monthly payments are as low as possible. That’s without sacrificing borrowing power, of course.
You see, the different ways of getting a swimming pool loan can have significantly different interest rates and some will undoubtedly allow you to borrow more than others. Below we’ll want to introduce you to RenoFi Loans and help you to understand why they’re an excellent option for pretty much any homeowner before comparing these with traditional options; a home equity loan or line of credit, a cash-out refinance, construction loan, HomeStyle loan or an unsecured personal loan.
A RenoFi Loan is a new type of home renovation loan that allows you to borrow the money that you need to carry out home improvements or additions (in this case, the construction of an inground pool) based on your home’s future value. It’s a second mortgage that’s perfectly suited to this type of project.
You see, while using equity has traditionally been the go-to way to fund improvements or additions to your home, this has its limits. And most homeowners will find that their borrowing power is limited.
Imagine you’ve only recently bought your home. And when we say recently, what we really mean is within the last five to 10 years.
The harsh reality is that you’ve probably not built up enough equity to pay for your pool, based on how many years it takes:
But a RenoFi Loan lets you borrow based on the value of your home after your pool has been installed. And given that this luxury addition will without a doubt increase what your home is worth, this is going to increase your borrowing power.
It means you’re able to borrow the money you need to pay for your pool, without having to find ways to reduce the cost or go for an alternative that has higher interest rates and, subsequently, that would mean higher monthly payments.
A RenoFi Loan could be a great way to finance your pool project. The RenoFi Loan process makes financing simple!
Home Equity Loan or Home Equity Line of Credit (HELOC)
If you have enough tappable equity in your home, then a home equity loan or home equity line of credit (HELOC) might be an option for you to use to finance the construction of your inground pool, but as you learned above, unless you’ve lived in your home for many years, there’s a good chance that this won’t be the case.
You no longer need to wait until you’ve got enough equity available when you can borrow against your home’s future value instead. You also shouldn’t have to reduce the specification of your pool or be forced into more costly methods of borrowing, as is often the case when home equity loans and lines of credit are initially assumed to be the best option.
A home equity loan or home equity line of credit (HELOC) might be best for you if…
- You’ve lived in your home for a long time now, and have built up a lot of equity that you can tap into.
- You are not interested in refinancing your first mortgage.
- You’re looking for a lower rate than you’d find with a personal loan or credit card.
Using a cash-out refinance for your pool loan brings with it many of the same challenges as using a home equity loan, but you’ll also need to refinance, which often ends up being at a higher rate than your existing mortgage. And shockingly, this is the case for 60% of homeowners who refinance.
And for this reason, most homeowners shouldn’t use this option, considering that alternatives exist that are likely better-suited. In fact, we’ve previously written about how refinancing is one of the dumbest things that homeowners do when paying for renovations and home improvements.
The only exception to this is when refinancing results in a vastly lower interest rate.
You could use a construction loan, a type of financing that, like a RenoFi Loan, lets you borrow based on your home’s future value. But we don’t recommend it.
In fact, we’ll go so far as to say you shouldn’t use a construction loan for pool financing.
Why? Because you’ll not only be forced to refinance into a higher rate, you’ll also face higher closing costs and have to go through a complicated draw process for your contractor to get paid. And for this reason, some contractors actually refuse to work with this type of loan completely.
Do yourself a favor and choose another option.
Fannie Mae HomeStyle Loan
Maybe you’ve heard about FHA 203ks or Fannie Mae HomeStyle Loans as a way to finance your renovation wishlist; two types of government-backed renovation mortgage that allow you to combine the cost of purchasing and renovating a property into a single loan.
Both are seen as attractive options for homeowners who have a lower credit score, with the requirements less than alternatives.
But let’s clear up one thing; swimming pools cannot be financed using an FHA 203k Loan, given that these are considered to be luxury amenities that are on the list of restricted improvements that are not permitted.
The same is not the case with HomeStyle Loans, though, and it is possible to use these as a method of pool financing.
That said, these loans come with a number of drawbacks, including higher interest rates, a requirement to refinance, and a lengthy and complicated process that often results in delays and higher fees.
If your credit score doesn’t allow you to qualify for a RenoFi Loan, consider a HomeStyle.
You’ll often find that personal loans are marketed towards homeowners as ‘home improvement loans’ or even as more specific products, let’s say as a pool loan.
But don’t be fooled into thinking that these are a specialist type of loan that’s been designed specifically for the type of project you’re able to embark on. Not at all.
These offerings are often high interest unsecured personal loans that are marketed for a certain use, rather than being anything unique or that offer distinct advantages over other alternatives.
And while you might find advertised pool loans, home improvement loans, or other personal loans that claim to let you borrow up to $100,000 or more, this is an ‘up to’ amount that’s only attainable by a very small number of applicants.
You see, the amount that you can borrow with these unsecured loans is usually based on your income, credit history, and your debt-to-income ratio. This means that many homeowners will have limited borrowing power with this type of loan, and face shockingly high interest rates, often between 8% and 15%.
And to help you understand the impact that these higher rates can have, just take a look at the difference in monthly payments on a $50k loan borrowed over 10 years at these two rates; 8% and 15%, compared with 4%.
|Interest Rate||Monthly Payment|
A lower interest rate means lower monthly payments, so it’s in your interest to find the option that gives you the borrowing power to borrow the full loan amount you need at the lowest possible cost.
To put it simply, most people shouldn’t be using a personal loan to finance their new pool, nor should credit cards be considered for the same reasons.
Swimming Pool Loan Rates
One way to help decide which financing option is best for you is comparing loan rates - however, it’s important to remember that:
- Rates vary, and yours will depend on your own personal financial situation. Rates you read online may not reflect your own individual options.
- You shouldn’t look at interest rates as a way to compare loan options in isolation. Each loan option might have different terms, potential closing costs or other fees, draws and inspections, or other factors that are important to consider as well.
|RenoFi Loans||Traditional Home Equity Loan or HELOC||Personal Loans||Fannie Mae Homestyle Loans||Cash-out Refinance|
|Rates starting as low as 4.12%||Average rate range is 3.25%-7.25%||Average rate range is 3.99%-36%||Average rate range is 2.65%-3.75% (This is a refinance of your primary mortgage - which will also require you to pay higher closings costs.)||Average rate range is 2.65%-3.75% (This is a refinance of your primary mortgage - which will also require you to pay higher closing costs.)|
Things to Consider for Pool Loans
Swimming pools are fast becoming one of the most popular additions that we want to make to our homes, and this comes as no surprise.
But before you give your contractor the go-ahead, you need to find a way to pay for the installation of your new pool, and here are the things that you need to keep in mind when considering your options:
- What type of pool are you looking for and what’s it going to cost
- How much money you need to borrow based on this
- How much equity you have in your home
- Your credit score and credit history
- Any debt on other loans and credit cards
- The maximum monthly payments you can afford
- The timeframe that you wish to repay the loan over
While the best method of financing will depend on your individual circumstances, RenoFi Loans offer a solution that lets you borrow based on what your home’s value will be after construction is completed and they’re an option that we recommend you at least consider if you’re not already familiar with what they are and how they work.
Does An Inground Pool Add Value To Your Home?
Perhaps the million-dollar question that’s often asked by a borrower before they’re about to begin construction is whether an inground pool will increase their home’s value.
And the simple answer is that yes, it probably will, but how much of the cost of construction can be recouped in added value depends massively on the size of the pool, your location, and other factors.
According to Bankrate, “many experts say having a well-kept pool can boost your resale value, especially an inground pool,” but “these are more coveted in warmer regions where they can be used year-round.”
And based upon estimates from HGTV, “Real estate experts estimate that an average 14x28-foot inground concrete pool potentially adds 5 to 8 percent to the real estate value of your home. If your property is worth $400,000, you’ll realize a boost to the value of your property of about $20,000 to $32,000.”
You may even find that if your neighbors have a swimming pool but you don’t, this can actually decrease your home’s value, making the installation of one all the more valuable.
While a pool maybe isn’t the most lucrative home improvements you can make, it shouldn’t always be about the money and the value it can add.
Make a decision based on what your family’s forever home looks like, and if that includes a pool, then go ahead and find the best way to finance it at the lowest possible cost.
You deserve it.
Should You Finance A Pool?
Most homeowners considering this type of home improvement project will be considering some kind of pool loan.
After all, very few people are lucky enough to have $50,000 or more available in cash without depleting their emergency savings, borrowing from their 410k, or turning to friends and family. And these options don’t come recommended in most scenarios.
But don’t lose sight of the reasons why you began considering the installation of an inground pool in your backyard in the first instance. We’re guessing that it was to add a little luxury to your home and to create an even more enjoyable outdoor space for the whole family.
A number of different types of backyard improvement loan exist, and we can’t encourage you enough to take the time to figure out the option that makes the most sense to you, based on your credit history, the equity that’s in your home, and other factors.
If you’re still considering the different swimming pool loans, remember one thing; for many homeowners, a RenoFi Loan makes the most sense.
To learn more about whether this option may be able to let you borrow all of the money you need without the drawbacks of other financing options, we encourage you to get in touch and chat with one of our advisors or, alternatively, give the RenoFi Loan Calculator a try .
How do I know if a RenoFi loan is right for my project?
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