Swimming pool financing: 4 Ways to finance a pool in 2022

How to finance a pool this summer

There may be nothing better in the summer months than having your own backyard pool. Unfortunately, installing an inground swimming pool costs over $50K on average.

What are your options if you don’t have enough cash? Is swimming pool financing available?

Thankfully, yes, there are plenty of ways to pay for a swimming pool. Here are the best pool financing options to consider this year.

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Four pool financing options

If you don’t have cash on hand to build a pool, there are a variety of financing options that can help.

Pool financing options include:

1. Cash-out refinance on your home
2. Home equity line of credit (HELOC)
3. Home equity loan
4. Personal loan or ‘pool loan’

The right type of pool financing for you depends on a variety of factors, like your existing home equity, your credit score, and how much cash you need. Here’s what you should know about each option.

1. Cash-out refinance to pay for a pool

Refinancing is the process of replacing your current mortgage with a new one. You can often refinance to get a lower interest rate and reduce your monthly payment.

Depending on how much home equity you have, you may be able to get cash back when you refinance.

You can use the cash for just about any purpose, like debt consolidation, home improvement financing — and yes, even building a swimming pool.

Pros of a cash-out refinance

The benefit of a cash-out refinance is that you’re able to borrow up to 80% of your home’s equity.

If you’ve had the home a while — or made a big down payment — that could be plenty to finance a new swimming pool.

But cashing out isn’t the only benefit of refinancing. You can also:

• Increase or decrease your loan term
• Switch from an adjustable-rate mortgage to a fixed-rate mortgage
• Switch from one mortgage program to another
• Remove a co-borrower from the mortgage loan
• Remove mortgage insurance

At today’s low rates, cashing out might be the best option for homeowners with enough equity to build a swimming pool.

If you can take cash out and drop your rate, it’s a huge win-win.

Cons of a cash-out refinance

The benefits of cashing out — and lowering your rate — have to be weighed against the overall cost of refinancing.

A refinance involves going through the mortgage application and approval process again. You have to submit updated income information, and your credit score must be high enough to qualify for the chosen mortgage program.

Refinancing also involves closing costs, which range from 2% to 5% of the loan amount. And your mortgage balance increases when you borrow from your equity, which can increase your monthly payment.

Finally, remember that a new mortgage is a secured loan, meaning if you can’t repay it, you could risk foreclosure.

So you have to make sure cashing out your equity is a sound decision that won’t negatively impact your finances in the long run.

2. Home equity line of credit (HELOC) pool financing

A home equity line of credit (HELOC) is a revolving credit line secured by your home’s equity.

Basically, a HELOC functions like a credit card. If you’re approved, you could access enough credit to finance your pool and then pay the money back on a drawn-out schedule.

Pros of a home equity line of credit

The advantage of a HELOC is that monthly payments are based on how much you withdraw from the account, and you only pay interest on what you borrow.

The draw period is typically 10 years, so you’ll likely have access to the line of credit even after you’ve paid off the pool.

Another big benefit is that interest rates on HELOCs are lower than credit cards or personal loans, because the debt is secured by your home.

Interest on a home equity line of credit might even be tax-deductible. You can deduct the interest when using funds to “buy, build, or substantially improve your home,” per the Internal Revenue Service.

Potentially the two biggest advantages to a home equity line, though, are speed and cost. You can usually get a HELOC within weeks, not months, like a traditional mortgage. There’s often little or no documentation required. Sometimes, you can even skip the appraisal.

Closing costs are substantially lower, too. Think, hundreds of dollars in closing costs instead of thousands with a cash-out refinance.

Cons of a home equity line of credit

The downside is that many HELOCs have variable interest rates, so your payments aren’t fixed.

It also creates a second mortgage, increasing your overall mortgage balance. This increases your ‘risk’ as a borrower, and might make it harder to refinance your primary mortgage in the future.

Keep in mind, a HELOC is a secured mortgage just like a refinance. If you can’t keep up with the monthly payments, you risk losing your home — and your pool.

3. Home equity loan pool financing

A home equity loan is similar to a HELOC in that it’s another type of second mortgage.

Using a home equity loan, you can tap your home’s value and borrow cash for many purposes, including a swimming pool purchase.

But instead of accessing a line of credit on an as-needed basis — like a HELOC — you’re given a one-time lump sum of cash to pay for your pool.

Pros of a home equity loan

Many home equity loans have a fixed interest rate and payment, so your monthly cost remains predictable. This is a big benefit over a HELOC.

A home equity loan might have a lower rate than a home equity line of credit or personal loan, too. And like a HELOC, the interest on a home equity loan might be tax-deductible.

Plus, the approval process can be faster and cheaper than a full cash-out refinance.

Cons of a home equity loan

The downside is that home equity loans, though cheaper than a full refinance, come with closing costs. And again, your house acts as collateral for the loan. So you could lose your home if you stop making the payments.

4. Personal loans or “pool loans”

If you prefer financing a swimming pool without tapping your home equity, you might apply for an unsecured personal loan.

Banks, credit unions, and other financial institutions offer personal loans, and they’re sometimes advertised as “pool loans.”

Once you’re approved, you’ll receive a lump sum to pay for your swimming pool.

Pros of using a personal loan

Getting funds with a personal loan is often faster than applying for a cash-out refi, HELOC, or home equity loan.

The application process should be simpler, and in most cases, you’ll get funds within a few days or a week.

Also, since your house doesn’t secure the loan, the bank can’t foreclosure if you stop making loan payments (hopefully this doesn’t happen).

Cons of using a personal loan

The downside is that personal loans have much higher rates compared to home equity financing. So you’ll end up paying more interest over the life of the loan.

To save money on your loan, always compare interest rates among different lenders. This can help you find affordable pool financing.

Should you finance a pool?

Pool financing is a smart idea when you can’t buy a pool outright. But you don’t have to be short on cash to apply for financing. It can also be a smart idea when you do have enough cash for a purchase.

Installing a swimming pool is expensive, and frankly, you might have reservations about spending a large chunk of your personal savings.

Some people would rather keep their cash liquid and finance the purchase, if they can get a low rate and an affordable payment.

Pool financing FAQ

Check your eligibility for pool financing

An in-ground pool is a big investment — so it’s important to choose the right financing option.

Think about tapping your home equity to secure the lowest interest rate on your pool financing.

And no matter which loan option you choose, make sure you shop around to get the best deal. Offers vary by lender, and your rate can make a big difference.