As summer brings sunny skies, warm days, and children who are eager to spend the hours that they normally spend in the classroom doing something fun, plenty of families start to picture a swimming pool in their backyard. However, serious swimming pools aren’t inexpensive additions. According to HomeAdvisor, the average cost of installing an inground pool is $51,890. That’s enough to make a homeowner ask the question: Can you finance a pool into your mortgage?
Can You Finance a Pool into Your Mortgage?
When it comes to finding funds to finance your pool purchase, can you finance a pool into your mortgage? Are there other ways you can capitalize on your home equity? What other options might you want to explore?
Cash-Out Refinance Loan
If you have your heart set on using a home loan to pay for your new swimming pool, refinancing with a cash-out refinance may be the way to do it. As The Mortgage Reports notes, a cash-out refinance will generally let you borrow up to 80% of your home equity, so if you made a large down payment or have been in the home for a while, you could easily have enough available to pay for the pool of your dreams. As an added bonus, refinancing could allow you to snag a lower interest rate, lower your monthly payment, or get better loan terms. However, refinancing comes at a cost, so you’ll need to make sure that it’s worth it. You’ll also need to remember that a mortgage is a secured loan. If you fail to pay your new mortgage payment, you risk losing your house.
Home Equity Loan
A home equity loan can be another way to use your share of your home’s value to pay for your new pool. As NextAdvisor points out, this strategy only works if you’ve managed to build up enough home equity to fund your purchase. It’s a poor plan for homeowners who haven’t yet squirreled away substantial equity. That’s because the amount that you’re able to borrow will depend on how much equity you have and the balance that’s remaining on your home loan. The advantage here is that home equity loans, like mortgages, generally have relatively low interest rates. However, that’s because your home is used as collateral for the loan, which means it’s at risk if you miss payments.
Home Equity Line of Credit
A home equity line of credit offers yet another way for homeowners to pay for a swimming pool purchase. As My Mortgage Insider explains, a HELOC is a revolving line of credit that works a bit like a secured line of credit. However, instead of depositing a sum in an account, your home stands as collateral. After you’re approved for a HELOC, you’ll receive either a checkbook or credit card to make your purchases during the draw period. In fact, that’s one of the major advantages of a HELOC. You can take out only as much as you really need. And, while you’re in the draw period, which often lasts up to a decade, you generally only have to make minimal payments. In some cases, only the interest is due. Then, at the end of the draw period, you’ll typically have 20 years to repay whatever you owe. What are the drawbacks to a HELOC? As with any loan, there are fees involved, and because a HELOC is secured by your home, a missed payment could put your home in danger.
Personal Loan
What if you’re wary of tying the security of the roof over your head to the pool in your backyard? If that’s the case, then you may prefer to finance your new swimming pool with a personal loan. As Forbes indicates, a personal loan is unsecured, which means you won’t need collateral to get it, and you won’t risk losing that collateral if you miss a payment. However, that peace of mind does come with a cost in the form of higher interest rates. This could be especially troublesome if your credit isn’t ideal.
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Are you searching for home loans or refinancing options that fit your situation perfectly? Reach out to PrimeLending West Texas today. We have locations in Abilene, Amarillo, Midland, and Odessa.