The Best Way to Pay for a Swimming Pool

When putting in your dream swimming pool, make sure you research different financing options to find the best way to pay for it.

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When my husband and I put in a swimming pool a few years ago, we were surprised at how high the total costs were. By the time we paid for the pool installation, permits, fencing and landscaping, pool equipment, and other associated expenses, we were looking at many thousands of dollars for our dream backyard.

We’d chosen to save up and pay cash for our pool, but not every family can do that or wants to wait until they have the cash in the bank. Because pools are so costly, financing them is common. If you’re going to borrow to build a swimming pool, it’s important you take the right approach to securing financing. Here are a few options to consider so you can decide the best way to pay for your dream pool.

Use in-house financing

Some pool builders have partnered with financing companies to offer swimming pool loans. This means your pool builder can help you to secure the loan that you need.

Using in-house financing is convenient because the pool builder already has a relationship with a lender, or a network of lenders. The builder can often help you take care of much of the paperwork, and will only partner with a lender that usually offers loans for the necessary amount to construct your pool.

Just because it is convenient doesn’t mean it’s always a good idea. Not all pool builders offer in-house financing, and you don’t want to restrict yourself to one that does just to make getting a loan easier. You want to shop around for the widest choice of pool installers so you can find the right person to do the job.

Even if your chosen pool builder does happen to have financing solutions, there’s no guarantee that the loan will be offered at a favorable rate or on good terms. While you can consider a loan through the pool builder as one possible option, you should also shop around to explore other ways to borrow for your pool.

Take out a home equity loan

If you owe less than your home is worth and have equity in the house, you could take out a home equity loan. When you do this, you borrow against the value of your house and the home serves as collateral.

Typically, when combined with all of your other mortgage debt, the total amount you’ll be allowed to borrow -- including your home equity loan -- is around 80% to 85% of the value of your home. If you have a $300,000 home and a $200,000 mortgage, you’d be able to borrow another $40,000 to $55,000. Some lenders may allow you to borrow up to 90% or even 95% of your home’s value, but interest rates will typically be higher if you have this little equity.

There are two big benefits to taking out a home equity loan to finance your pool. The first is that the interest rate will usually be lower than other sources of financing, including credit cards or personal loans. The second is that the interest on your loan should be tax deductible if you itemize as long as you’re using the funds to improve your primary home and your combined total mortgage debt doesn’t exceed $750,000.

There are downsides to this financing option too. Your home is put at risk by serving as collateral on your loan and you could end up foreclosed on if you can’t make payments on your pool. If you’ve borrowed so much that you have little equity in your home, then you’ll have trouble if you need to sell because you may not be able to get enough to pay off your home loan. In this situation, you’d have to bring cash to the table or convince your lender to allow a short-sale. This would damage your credit tremendously.

Swimming pools don’t generally have a great return-on-investment, so there’s a good chance you won’t get back all the money you put into the pool when you sell your home. This exacerbates the risk that tapping into your equity could leave you underwater on your loan and owing more than the home is worth.

Use a personal loan to pay for your pool

Another option to consider to pay for a pool is to use a personal loan. Personal loans can come from banks, online lenders, and credit unions. Although there are some personal loans specifically marketed as swimming pool loans, you can actually get a personal loan from any lender since lenders don’t care what you do with the money once you’ve borrowed it. This means you have a wide variety of lenders at your disposal and can shop around for the best loan rates.

Personal loans are typically available for up to $50,000, although some lenders will allow you to borrow as much as $100,000 or more depending upon your credit and income. You should easily be able to qualify for a large enough loan to afford a very nice pool -- as long as you have a good credit score, can prove you’ll be able to make payments, and don’t already have way too much debt.

Personal loans can also have much lower interest rates than credit cards, come with fixed repayment periods so there’s no question how long it will take to pay back the loan, and don’t carry the risks home equity loans do. Most are unsecured, so there’s no collateral. Even secured personal loans are usually secured by a bank or investment account, not by your home, so you don’t put your house at risk by borrowing with a personal loan.

Which is the best option for you?

If you have plenty of equity in your home and you want the lower interest rates and tax deduction, it may make sense to take out a home equity loan -- as long as you’re 100% confident you can pay it back. Otherwise, a personal loan is typically the best approach for financing a pool because qualified borrowers can get a good loan at a good rate and pay it back on a fixed schedule.

Just make sure you don’t borrow more than you can afford, no matter what you do, and that you take the time to consider whether a pool is a good investment for your family to make.