Short Summary
- According to realestate.com.au, a swimming pool can increase the value of your home by 7%.
- There are five common ways to finance a swimming pool, some of which are secured and other unsecured.
- Poolz recommends seeking independent financial advice to determine which financing option is best for your.
Is a new pool a good lifestyle investment?
Absolutely! The benefits of owning your swimming pool are endless! A perfect place to cool off during our long, hot summers? Tick! A tranquil place to relax and unwind after a tough day at work? Tick! A fun place to refine your dive-bombing skills and entertain the kids? Tick! A convenient place to… okay, you get the picture! At Poolz, we live and breathe swimming pools, so we naturally believe that incorporating a new pool into your own private oasis is one of the best lifestyle investments you can make.
Is a new pool a good financial investment?
Only an independent, licensed financial professional can answer that for you, however we can tell you that a stunning swimming pool will certainly help you market your home should you wish to sell it in the future and according to realestate.com.au, it may also potentially enhance your home value up to 7%! So, for a $1.5 million home, that could mean a $105,000 boost in value which equates to a return on investment of up to a 50% on a $70,000 swimming pool.
The 7 critical steps to financing your dream pool:
- Click here to download our ‘Pool Buyer’s Guide: Selecting your dream pool made easy!’ which includes everything you need to know about selecting your dream pool. Full of valuable information and expert tips, this comprehensive eBook explores everything from different pool types, shapes, and sizes to installation costs, on-going costs, and much more.
- Determine how much you will need to borrow by clicking here to get quotes from local pool building professionals.
- Based on the pool quotes you receive and the amount you will need to borrow, seek independent advice from a licensed financial professional on the best pool financing option for your personal needs and unique financial position.
- Based on the independent financial advice you receive, select the most suitable pool financing option.
- Based on your selected pool finance option, research and compare different lenders to find the most competitive loan terms.
- Based on the most competitive loan terms, seek independent financial advice to ensure you can meet the required loan repayment schedule.
- Seek any further clarification you may need about the loan terms from your chosen lender then apply for your pool finance once all your concerns have been addressed.
Secured Loan vs Unsecured Loan?
A loan is considered ‘secured’ when the lender uses something you own (your house, car, or other high-value asset) as financial ‘security’ against the loan. This essentially gives the lender ownership rights to the asset which they can sell to help recover the loan value in the event you are unable to repay the loan (ie: so they can get their money back). Due to this added security, the interest rate for secured loans is typically lower and the repayment period is typically longer than unsecured loans.
On the other hand, an unsecured loan has no claim over anything you own, so to protect themselves and reduce the risk of you defaulting on your loan, the lender will determine your capacity to repay the loan by placing greater emphasis on your overall financial position including your credit history, income, and other debts. The interest rate charged on an unsecured loan is also typically higher and the repayment period is typically shorter than that of a secured loan.
5 Pool Financing Options
1. Home Equity Loan (secured)
Taking out a home equity loan (otherwise known as a ‘second mortgage’) allows you to borrow approximately 85% of your home’s value less what you currently owe on your home loan (mortgage) and can therefore be a viable way to finance your new pool if you have sufficient equity in your home to cover the cost of your new pool.
Home Equity Loans are repaid in fixed monthly instalments over a term of up to 15 years and require a firm quote from your preferred pool builder as you can only borrow once using this option. The loan interest rate is tax deductible and is also fixed for the duration of the loan which can make budgeting for loan repayments easier, however the approval process for Home Equity Loans can take longer than other finance options.
2. Home Loan Refinancing (secured)
In simple terms, this pool finance option means you refinance your existing mortgage to include the cost of your new pool. This essentially results in a new, larger mortgage (ie: old mortgage + cost of new pool = new mortgage) that will likely include a different interest rate (based on current market) and repayment terms. Once your new mortgage has been approved and processed, you use it to pay off your old mortgage and cover the cost of your new pool.
3. Home Equity Line of Credit (secured)
Similar to a home equity Loan, this is can be a viable pool finance option if have sufficient equity in your home to cover the cost of your new pool as it also allows you to borrow approximately 85% of your home’s value less what you currently owe on your mortgage.
The main difference between this financing option and a home equity loan is you can draw from your home loan as needed while your new pool is being constructed which can provide added peace of mind if changes to the construction cost occur. Another key difference is that a home equity line of credit requires you to make interest only repayments during the ‘draw period’ (typically the first 10 years) after which the borrowed amount is repaid over a period of up to 20 years.
Furthermore, the loan interest rate is variable as opposed to fixed which can make budgeting more challenging as it may increase (or decrease) over the loan period. However, similar to a home equity loan, the interest rate is tax deductible, and the longer repayment schedule can also help to reduce monthly repayment amounts.
4. Personal Loan (unsecured)
A personal loan can be a viable pool finance option if you do not have sufficient equity in your home or other assets to cover the cost of your new pool.
The approval process for a personal loan is generally quite fast with funds often available within a day or two of lodging your loan application. Personal loans are repaid in fixed monthly instalments over a term of 2 to 7 years with the annual interest rate based on the size of the loan, your credit score, and your debt-to-income ratio (ie: how much you earn compared to how much you owe). Similar to a home equity loan, the fixed interest rate can make it easier for you to budget for your loan repayments, however personal loan interest rates are higher and not tax deductible, and the shorter repayment terms can make the monthly repayments quite high.
5. Handypay (unsecured)
‘Swim now, pay later’ companies like Handypay often approve loan applications in as little as an hour and typically offer a fixed loan repayment figure and zero early exit fees. This can therefore be a fast and convenient option if you want to get the ball rolling on your new pool but you’re having trouble refinancing your home loan.
Conclusion
Our mission at Poolz is simple. We exist to help make your pool building experience as simple and seamless as possible from start to finish by ensuring you are fully prepared and well-informed every step of the way. So, we hope the valuable information and tips we’ve provided in this article bring you a step closer to making your dream pool a reality by helping you select the best pool financing option for your personal needs.
