A home equity loan allows you to borrow money by utilizing the equity in your home that has accumulated due to the difference between the value of your home and your outstanding mortgage balance. This type of loan gives a significant sum of money that must be repaid over a predetermined length of time in fixed monthly instillments. Many lenders allow you to borrow up to 80% of the equity in your home.
According to HomeAdvisor, a home renovation business, an in-ground pool will typically cost between $38,370 and $72,433, or an average of $55,188 in 2022. Your location, the materials used in construction, the size, and the pool’s amenities (such as slides and water features), among other considerations, all influence the price.
From concept to completion, an in-ground pool can be built in six to twelve weeks.
Above-ground pools are much less expensive than in-ground pools. An above-ground pool can cost anywhere from $883 to $5,019 in total, according to HomeAdvisor estimates for 2022. The average value is $2,909
Should a Pool Be Paid for with a Home Equity Loan?
There are various considerations when determining whether to use a home equity loan, often a second mortgage, for a pool project.
When Should You Use Your Home Equity to Get a Pool Loan?
If you don’t have enough cash in the bank to cover the pool project’s costs, a home equity loan may be your best alternative.
• If you finance a pool project with a home equity loan, the interest rate is often fixed, providing you more control over your monthly payments.
• Home equity loans often have lower interest rates than credit cards and personal loans. A home equity loan for a pool may make sense if you live in a warm region. According to HomeAdvisor, an in-ground pool in a warm environment can increase the market value of your property by up to 7%.2
• A home equity loan may be a more appealing financing option than a personal loan or credit card, which does not provide the same tax benefit because of the potential tax deduction on interest incurred.
Using Home Equity Loans to Build a Pool
• If you are apprehensive about committing a large sum to a pool project, a home equity loan may not be ideal. According to HomeAdvisor, you are unlikely to regain the entire cost of the project when you sell your home.2
• A home equity loan may have higher interest rates and additional costs than other types of borrowing, such as a HELOC.1
• If you’re afraid about losing your home to foreclosure, a personal loan or credit card might be a better option because you wouldn’t be putting it up as collateral.
• A home equity loan, rather than using your assets to fund the project, will result in more incredible prices for a pool due to interest and other fees.
• If you currently have a lot of debt, it may be a good idea to use savings rather than a home equity loan to finance your pool renovation. You may be denied a home equity loan if your home lacks inadequate equity.
Alternative Pool Financing Methods A home equity loan isn’t the only way to finance a pool. Here are a few more alternatives.
HELOC
HELOC is a revolving line of credit, similar to a credit card. Your home serves as collateral for a HELOC. A lender approves an applicant for a specified HELOC credit limit. The borrower is free to use that source of funds as they see fit, as long as they do not exceed their credit limit. The lender will charge interest on only the money you use, not the entire amount you are granted.
One advantage of a HELOC over a home equity loan is that the lender assesses interest on the loan, not points, fees, or other penalties. A HELOC has a variable interest rate, but a home equity loan has a set interest rate. This is one disadvantage.
Refinance Loan with Cash Out
A cash-out refinance loan pays off your previous mortgage and replaces it with a new one. The new mortgage terms may alter, such as a more extended payoff period. Cash-out refinances loans have both fixed and variable interest rates.
Credit Card
A credit card is another option for financing a pool project. In contrast to a home equity loan, a credit card enables immediate access to funds. A credit card’s credit limit may not be sufficient to cover the cost of a new pool, but a home equity loan may have more cash available.
You may also get a particular credit card deal, such as a 0% annual percentage rate (APR), which might help you save money on your pool renovation. However, if you are not eligible for a special deal, the interest rate on a credit card might be substantially higher than that on a home equity loan.
Pool Loan
A pool loan is often an unsecured personal, meaning no collateral is required. Your credit history will determine the majority of your capacity to receive a pool loan.
A pool loan, instead of a home equity loan, may be approved in days rather than weeks. Because a pool loan frequently lacks collateral, its interest rate is likely higher than that of a home equity loan. Compared to a home equity loan, a pool loan may provide you with less money.
Construction Loan
A construction loan for a pool allows you to borrow money against the possible future value of your home. It is a short-term loan with the potential to become a mortgage. Because the interest rate and fees for a construction loan may be higher than those for a home equity loan or a standard mortgage, several lenders advise against using one for a pool.
Home Improvement Loan
Unlike a home equity loan, a home improvement loan typically requires little to no equity. A home improvement loan has a fixed interest rate. On the other hand, a home remodelling loan necessitates more paperwork than a home equity loan. For example, you must provide a formal contract to a contractor that describes the project and the cost.
How long does it take to get a home equity loan?
A home equity loan can be completed in 14 to 45 days.15 Each lender has a unique timeline. On the other hand, a personal loan could take up to a week to obtain.
