Many homeowners dream of having their own swimming pool, especially after the heat of summer settles in. But after checking the price tag, a lot of would-be pool owners give up before they even start.
It doesn’t have to be that way.
With the right financing, an in-ground pool may be more affordable than you think, while also bringing years of enjoyment and adding to your home’s value.
There are four good options to finance a swimming pool:
- Home equity loans (HEL)
- Home equity lines of credit (HELOC)
- Cash-out refinance mortgages
- Personal loans
How much pool can you afford?
Pool prices have surged over the past year because of supply and labor shortages. According to HomeAdvisor.com, the average cost of a pool installation is about $34,000.
Above-ground pools cost a lot less — up to $5,000 or so — while in-ground pools could cost anywhere from $20,000 to $100,000.
In-ground pools tend to add more home value than above-ground pools because they’re generally considered more aesthetically pleasing.
How much you’ll spend also depends on the pool’s size and shape, the construction materials (concrete, fiberglass, or vinyl), the installation costs, and any “extras” like a hot tub, slide, or a diving board.
Also, keep in mind that many homeowner’s insurance policies and local laws require fencing around pools to protect children and pets from falling in.
In-ground pool installation & construction cost breakdown
You’ll also need to factor in ongoing maintenance as well as the increased utility costs, which can range between $500 to $4,000 per year depending on what type of pool you get.
Over a 10-year period, those costs can range from around $5,000 up to over $40,000.
Step-by-step guide to financing a pool
Before we get into the details of pool financing, here’s a brief step-by-step overview.
Financing a pool works a lot like financing any other home improvement project.
- Step 1 — Work on your credit score: Borrowers with excellent credit can borrow more at lower rates. Check your credit score and improve it by making on-time payments on your debts and paying down balances. Disputing errors in your credit history can increase your score.
- Step 2 — Plan the project: How much room do you have on your lot for a pool? What kind of pool do you want? Find some good pool companies to help answer these questions.
- Step 3 — Estimate the cost of the project: In-ground pools cost a lot more than above-ground pools. Extras like diving boards, slides, and heaters will add to the cost. A pool house could double the cost.
- Step 4 — Decide which type of financing to use: Unsecured personal loans are fast and convenient. But second mortgages cost less in the long run. Banks, credit unions, and online lenders usually offer most types of financing.
- Step 5 — Apply for the loan: Shop around with at least three different lenders for your loan type’s best rates. Understand your loan’s repayment terms before moving forward.
Once you have financing, you’ll be ready to start the project.
But first: Step 4 needs some more exploration. What is the best type of financing for a pool?
Best way to finance a pool: Unsecured or secured?
How much you can spend on a pool and its installation will depend a lot on how you finance the project.
Pool stores and some banks offer “pool loans” which are really just unsecured personal loans. Since they’re not secured by property, these loans charge higher interest rates than secured loans like mortgages.
Depending on your credit history, a pool loan rate may be in the double digits.
Still, compared to getting a loan that’s secured by your home value, a pool loan can close a lot faster and costs less upfront. You could get the funds within a week instead of several weeks.
Plus, you wouldn’t have to tie up any home equity. The equity would be there later if you needed it to back a debt consolidation or home improvement loan.
Unsecured pool loans have their advantages. But if you’re interested in getting the best interest rate and saving thousands of dollars in finance charges, a secured loan will be the way to go.
How interest rates affect swimming pool financing
Shoppers tend to compare pool costs — such as materials, construction, and maintenance — without paying much attention to finance charges.
But, if you’re on a fixed budget, finance charges will impact all your other decisions about materials and construction.
Let’s say you have room in your monthly budget for a pool payment of $500. You decide to spread the repayment across a loan term of 15 years:
- At 6% interest: You could borrow about $60,000
- At 8% interest: You could borrow about $52,000
- At 10% interest: You could borrow about $46,000
- At 12% interest: You could borrow about $42,000
All of these loans would require monthly payments of about $500 a month, but your pool buying budget would be a lot bigger at 6% interest compared to 12% interest.
Secured loans provide the best way to get interest rates on the lower end of this scale.
Secured financing for swimming pools
When you use a mortgage product to finance a pool, you’re leveraging the value of your home to get a lower interest rate.
There are three ways to use the value of your home to get more affordable pool financing:
- Home equity loans: These work like personal loans. They have fixed rates and fixed monthly payments. But since they’re secured by your home equity, you can get a much lower rate. These loans are ideal for big home improvement projects, including installing a pool.
- Home equity lines of credit (HELOC): A HELOC works more like a credit card but with a much lower rate since your home equity guarantees the credit line. You could withdraw and repay money from the line of credit as needed. HELOCs work well for projects you’ll complete in phases.
- Cash-out refinance: A cash-out refinance would pay off your current mortgage while also adding in more money to pay for the pool. You’d end up with one loan that combines both the pool and your existing mortgage debt.
Each loan type has its own pros and cons, and the best choice will depend on your situation. We’ll explore each option more below.
Whatever you decide, avoid financing your swimming pool with credit cards, which carry significantly higher interest rates.
Home equity loans
Also known as a “second mortgage,” a home equity loan pays a lump sum at a fixed interest rate, which you typically have to repay in 10 to 15 years.
The lender may charge closing costs, but they should be lower than the first mortgage loan costs. Some lenders don’t charge closing costs in exchange for a higher interest rate.
The interest may be tax deductible. (According to the new IRS rules, if the loan is used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” then the interest can be deducted. Consult with a tax professional to confirm.)
The downside of a home equity loan is that you have to borrow — and pay interest on — the entire lump sum instead of borrowing smaller, incremental sums as needed.
For that, you’ll want a home equity line of credit.
Home equity loan pros and cons
- Fixed interest rate and payment
- Average-to-good credit OK
- Lower rates than personal loans
- Low closing costs
- Requires a new lien on your house
- Ties up home equity
- Slower closing times than personal loans
Home equity lines of credit (HELOCs)
A home equity line of credit (HELOC) is a revolving line of credit that lets you borrow against your home value. It works like a secured credit card, but instead of depositing money into a bank account for use as collateral, the lender uses your home as collateral.
The lender uses your home’s appraised value (minus what you still owe on the mortgage) as well as other factors like your credit history, debt, and income to determine your credit limit.
Once you’re approved for a HELOC, you’ll receive a set of blank checks or a credit card to use for withdrawing funds. You can withdraw only the money you need — as you need it — to pay for the excavation, pool, fence, installation, and extras.
This lets you avoid paying interest on money you haven’t spent yet. Monthly payments will be based on what you’ve withdrawn so far.
HELOCs usually have variable interest rates, though some lenders will convert HELOCs to a fixed rate for all or part of the balance. At some point, usually within 10 years, a HELOC will automatically convert to an installment loan, and you won’t be able to draw money after that.
Banks and credit unions usually offer HELOCs, but many online mortgage lenders don’t.
HELOC pros and cons
- Borrow and repay funds as needed
- Low closing costs
- Competitive interest rate
- Average credit or good credit is usually OK
- Variable mortgage rates
- Ties up home equity
- Places a new lien on your house
- Slower closing times than personal loans
A cash-out refinance combines the cost of your new pool and your current mortgage debt into one, new loan amount.
For example, if you need $50,000 for a pool, but still owe $100,000 on your house, you can refinance the mortgage for $150,000 and use the extra $50,000 to cover the pool costs.
You’ll end up with one monthly payment instead of two.
If you can improve your current mortgage by getting a lower rate or changing the loan’s term, a cash-out refi can do that while also rolling in the cost of a new swimming pool.
But if you’re happy with your current mortgage because of its low rate, or because it’s almost paid off, this loan option isn’t for you. Instead, keep your current mortgage and use a second mortgage or a HELOC as a separate swimming pool loan.
The application process for a cash-out refinance is almost exactly like getting a primary mortgage. The loan will require a full set of closing costs. The amount of cash back you can get will depend on the value of your home, your monthly debts, and your credit score.
Like the home equity loan and the HELOC, the interest paid on a cash-back refinance may be tax deductible for home improvements.
Cash-out refi pros and cons
- Combines house and pool costs into one loan
- Can lower the interest rate on all mortgage debt
- A chance to change current loan term
- Not ideal if you already have a good mortgage rate
- Not ideal if home is almost paid off
- Full loan closing costs required
- Could take up to weeks to get funds
Unsecured personal loans or “pool loans”
Another way to finance a new pool is through an unsecured personal loan, also known as a pool loan. Pool stores may offer this kind of financing, and they may even advertise zero interest for the first few years.
But, eventually, most personal loans cost more than secured financing. Over time, their higher finance charges add more and more to the cost of the loan.
Unsecured personal loans have to charge higher interest rates because lenders would have no way of recovering their losses if you failed to make payments. With a mortgage loan, the lender could foreclose and sell your home.
But these pool loans also have their advantages:
Pool loan pros and cons
- Won’t tie up home equity
- Won’t place a new lien on your house
- Fast closing times
- Low closing costs
- Even the best rates are higher than most mortgage rates
- Need excellent credit to get the best rates
Should you finance a pool?
Most Americans have $5,000 or less in savings, according to a study conducted by the Federal Reserve.
That’s not enough to cover an in-ground swimming pool. Financing may be the only way for most Americans to add a pool to their homes.
But is it smart to go into debt for a pool, even if you can get the lowest interest rate?
Like a lot of personal finance questions, this one depends on your unique preferences and needs.
A pool can enhance the value of your home — by about 7% on average, according to the National Association of Realtors. A big home improvement project like updating an old kitchen or adding an extra bathroom could have a bigger impact.
Ultimately, the question is this: Will the new pool add enough to your quality of life to justify the ongoing debt? The financing staff at the pool company will say yes. But only you can answer that question for you.
Additional pool costs to consider
The pool, the installation, the landscaping — you’ll pay these costs one time. Other pool costs must be paid regularly.
Maintenance costs reach at least $500 a year and could reach as high as $4,000 a year, according to HomeAdvisor. Costs include chemicals, filters, and utility bills for heating, lights, and pumps.
Simpler pools — unheated pools, saltwater pools, smaller pools, for example — need less maintenance.
Be sure to consider ongoing maintenance costs in your financial plans. A poorly maintained or closed pool could hurt the value of your home.
Keep in mind your homeowner’s insurance premiums will also increase when you have a pool.
Best way to finance a pool FAQs
What type of loan is best for a pool?
The best pool loans charge the lowest interest rates, the lowest upfront fees, and provide enough money for the project along with a contingency if the project runs over budget. Home equity loans can check all these boxes for many borrowers. Be sure to compare the upfront and ongoing costs of any type of financing you’re considering.
What is the typical financing for a pool?
Home equity loans and lines of credit work well for homeowners who have enough home equity to cover pool costs. Homeowners without enough equity may need to consider an unsecured personal loan, also known as a pool loan.
Is it hard to get financing for a pool?
No. Borrowers have several options for swimming pool financing. Homeowners with good credit, and enough equity to back the loan, can use home equity loans or home equity lines of credit to pay for pool costs. Homeowners without enough equity could use unsecured personal loans. Borrowers with bad credit should strengthen their credit file before applying.
What is a pool loan?
A pool loan is an unsecured personal loan used to pay for a new pool and its installation. Since the loan is unsecured, the borrower does not post collateral. Posting no collateral has advantages: the lender can’t repossess the pool or your home, for example. But it also has a big disadvantage: Without collateral, the lender charges higher interest rates.
Can you add a pool to your mortgage?
Yes. A cash-out refinance can combine new pool costs with your existing home buying costs. You’d get one, new mortgage loan that’s large enough to combine your existing mortgage debt with the overall cost of a new pool.
What are today’s rates on swimming pool loans?
Home values have increased over the past few years, and a higher home value means more home equity.
If you’ve been thinking about adding a swimming pool to your property, your home equity can make borrowing money for the project more affordable.
How do you get started? WIth a mortgage preapproval. It can show your borrowing power. It’ll also estimate your interest rate and other borrowing costs.