Swimming Pool Finance

Pool Financing Options

There are a number of options for financing a pool; a secured or unsecured personal loan, refinancing your current mortgage to release equity, applying for a construction loan or a line of credit.

1. Secured or Unsecured Personal Loan:

The difference between a secured and unsecured personal loan, is that a secured loan is secured by something you own like your house or car. In the unfortunate event that you are unable to pay your loan, the lender will use the security to pay out the loan. Unsecured loans are considered a higher risk for lenders which means that you may be charged a higher interest rate than that of a secured loan. Personal loans are generally capped at around $30,000. This may be suitable depending on the type of pool that you are installing, however you may find that the interest rate will be higher than that of a home loan.

2. Refinance an Existing Mortgage to Release Equity (Home Equity Loan):

An alternative way of financing your pool may be to refinance your existing mortgage to release some of the equity. With this finance method, you are borrowing against the current value of your home. It is not possible to borrow the full value of your home; however, lenders will generally lend up to 80 per cent of the value. Some lenders may release more than up to 80% (additional fees and charges such as LMI will apply which can be expensive) if you have evidence of how the funds are going to be used. In the case of installing a pool, council approval and a building contract.

3. Construction Loan:

Construction loans are suitable for projects that may be expensive and require major structural work to be undertaken. For an in-ground pool installation, often excavation is required and therefore a construction loan may be the right solution.

A construction loan is like a refinance or home equity loan in that it uses the equity of your home to secure the loan. When applying, the lender will require evidence of council approval and a fixed price building contract. Unlike a regular home loan where you receive a lump sum amount, the lender will pay progress payment amounts periodically throughout the building process. This is similar to a refinance/home equity loan, except the lender will take into account the final value of your home after the renovation. You won’t be given the full loan amount upfront, but in staggered amounts over a period.

4. Line of Credit:

A line of credit allows you to access extra money when you need it. It functions in a similar way to a credit card where you have a pre-approved limit set by your lender, secured against your property. This means that you have the flexibility to access money up to your approved limit when you want to without having to apply for another loan. You are therefore only charged interest on the money that you use, or your outstanding balance. This may be the ideal solution to upgrade your backyard and install your dream home.