Installing and Getting a new pool can cost tens of thousands of dollars, therefore homeowners may pay cash. You might wonder if you can — or if tap into that cash to finance the project, if you have equity in your home.

It’s almost as American as apple pie and baseball: a backyard pool adults can relax in after a long day at work and in which children splash with friends in on a hot summer day. As of 2019, there were more than 6.1 million in-ground pools nationally, according to the Association of Pool & Spa Professionals.
There is no easy answer. The choice that is ideal is dependent upon your financial situation and your motives for receiving the pool. So let’s dive into exactly what you should consider before using a home equity loan to build a pool.

Using a Home Equity Loan to Build a Pool

Sure, you can tap your home equity to help pay, however, is it a wise move? Following is a look at the pros and cons.

Pros

Lower rate of interest

A home equity loan generally comes with a lower rate of interest than you would get by using a credit card or personal loan.

Possible tax benefits

The proceeds from a house equity loan can be used for any use, but the interest paid on the loan is tax deductible if it’s used to”buy, build or substantially improve” the house securing the loan, each the Tax Cuts and Jobs Act of 2017. Keep in mind, you’ll want to itemize deductions to take advantage of the tax break.

Fixed interest rates

Interest rates on home equity lines of credit (HELOCs) and credit cards are generally changeable, so if interest rates rise, your payments go up also. But home equity loans typically arrive with fixed interest prices. That makes it more easy to understand.

Cons

Puts your house at risk.

A home equity loan uses your home as collateral. The lender could foreclose on your house In case you are not able to keep up with your monthly payments.

Closing costs

Taking out a home equity loan entails fees and closing costs. While those vary by lender, they run between 2% to 5 percent of the amount borrowed.

Higher interest rates

Interest rates on home equity loans are typically greater than those offered for HELOCs. You’re basically forgoing a lower interest rate in exchange for stability at the speed you’ll pay over time.

Time-consuming approval process

The lender will have to review your credit and verify your income, before you can get approved for a home equity loan. It could request a copy of the deed to two years of tax returns, pay stubs or your house. It also could require an evaluation of the house. It typically takes four to fourteen days, although the time that it takes to close on a house equity loan will change depending on the creditor and the complexity of your financial situation.

You might not have enough equity

Lenders limit the amount you can borrow to 85 percent of the value of your house, minus whatever debt will be left on it. Let us say you have a home worth $200,000 plus a mortgage balance of $160,000. Few creditors would let you borrow the full $40,000 of equity in your property. In most cases would be $10,000. (Here is the math: 85 percent of the $200,000 home worth is $170,000. Take out the $160,000 left on the mortgage and you get the $10,000 home equity loan amount).

The cost and value of building a swimming pool

The Price and value of Creating a poolThe price may vary based where you reside and on the size and kind of pool you need. The material may affect the purchase price.

An in-ground pool’s lining might be made from fiberglass vinyl or concrete, based on Fixr. Vinyl is generally the least expensive choice and includes an average price tag of $25,700, Fixr states, while fiberglass building bumps the price up to a mean of $31,400. The alternative, A lining, will cost somewhere between $29,600 and $50,000, Fixr states.Of course isn’t the cost consideration.

You might choose to put in spa or a deck, fence, patio, filtration and heating, slide board. These features will drive your total up. Pools on the end can end up costing up to $100,000, based on HomeAdvisor.

Then there will be the expenses that are continuing. Between upkeep, repairs and cleaning and utilities, HomeAdvisor said homeowners can expect to shell out up to $3,000 to $5,000 annually to maintain their pool.

Once you sell the home, however, you will receive your money back? This is different.”Whether or not it raises the value of your house is entirely determined by where you reside,” said Tammi Lindley, a senior loan officer with Mortgage Express in Portland, Ore.”Are pools the standard to your area? Then it may make sense to get it installed” Otherwise, potential customers could think about them maintenance nightmare and a security hazard, Lindley.

The National Association of Realtors projected that homeowners regain only about 43 percent of the price of installing an in-ground pool. Only a very small proportion of property representatives urged installing a survey for its resale value.

Other options

If you decide to build a pool, a home equity loan is not your only option for paying for your job. Consider these choices.

Cash

Pools are expensive, and including interest payments only drives the price up. Look at saving up enough money to pay for the project instead of financing it.Think you can not afford to save much? Think about how much your monthly expenditures would increase with a pool and home equity loan maintenance costs. If your loan payment would be an extra $400 per month and maintenance and utilities for the pool will cost $300 you could start toward saving for the pool placing. At that speed, you could save $30,000 in under four years.

Financing with the Manufacturer

Some pool installation businesses offer financing to their clients. Compare the rates and terms offered by your installation company to all those available through a house equity loan to choose which is the better choice.

Credit Card

In case you have a high enough limit on your credit card, then swiping the plastic might be the fastest route to funding your pool setup. But credit cards include rates of interest that are higher. The average credit card is about 15%.

Cash-out refinance

With a balance, you take a new mortgage with a refinance. Your new loan is first used to repay your existing mortgage, and then the rest arrives in money to you. The rate of interest to get a cash-out refinance will be lower. However, between extending your loan term and closing costs, it might cost you more in the long term.

Construction loan

A construction loan is a loan designed to fund remodeling or building a house. The money is paid out as building progresses, so that you only pay interest on the amount outstanding while the project is underway. Once construction is finished, you refinance into a mortgage or can pay off a construction loan in a lump sum.

Corey Vandenberg, a mortgage agent with Platinum Home Mortgage in Lafayette, Ind., said construction loans are often a better financing option for pool setups. These loans typically offer competitive fixed prices and take under consideration the worth of the house when the pool is finished. “In the long run, this is just the perfect way to go,” he said.

One example of a prospective building loan is Fannie Mae’s HomeStyle Renovation mortgage. It includes pools at the list of allowable enhancements.

Personal loan

The benefit of a personal loan is that it is not backed by your property. Should you cannot cover the loan for your swimming pool and run into financial troubles, the danger of losing your house won’t run. But individual loans typically come with higher rates of interest than loans.

Should you use a house equity loan to build a pool? It depends on your reasons.

Installing a pool is expensive, and you are unlikely when you sell the home to recover the costs. But than raising the resale value, if your reasons for wanting a swimming pool are about loving your home, the choice comes down to if you are able to spend it.

Compare the interest rate and terms of a home equity loan against funding options if taking on an additional mortgage payment and maintenance costs won’t negatively affect your ability to satisfy your other financial objectives.

Consider the advantages and disadvantages before taking the plunge, and do your homework.