So your family wants to have a new In-Ground Swimming Pool installed during 2017. Our average priced pool last year, including all options, but excluding landscaping, exceeded a price of $55,000! Add in landscaping and more money if your pool is higher than the average and it is no wonder that we are often asked what we know about financing an in ground pool in Indiana in 2017! If you are relying on financing for your pool, this is something you will want to explore BEFORE you spend too much time on the pool buying process!
So what are the financing options? How much a month will a loan cost? What kind of interest rates can you expect? Can you write the yearly interest off your taxes? Each person's situation will be different and rates change but here is some great information as of December 1, 2016!
There are mainly two financing options available.
Home Equity Loans. The first choice generally will be a Home Equity Loan (aka second mortgage loan) because of the lower interest rate. As of January 1, 2016, at our most popular lender, fixed rates are approximately 4.25-6% per annum (assumes <90% LTV, 20% paid by borrower, fixed rate for a 12 year term and 700 credit score and a good debt to income ratio, maybe 50%).
Home Equity Loans cannot exceed the amount of Equity you have in your property. Flaws in your personal credit rating are more tolerable since your property is the collateral. The interest you pay is generally "tax deductable". The terms are very flexable and can be spread out for up to 25 years.
So let's make up an example of how a Home Equity Loan might work: Your house value is $400,000,and after subtracting all outstanding liens of $300,000 you determine that you have $100,000 of equity in your house. But since your bank will only allow total loans equalling no more than 85% of the value on your house (ie 85% x $400,000 = $340,000 less $300,000 in liens leaves a maximum of $40,000 to be loaned), you will only be able to borrow $40,000 based on equity and a 90% LTV requirement.
So let's say your pool project is $60,000 under the above scenario. That means you will have to come up with $20,000 and then you could borrow $40,000. Assuming you meet the lender's other requirements, including required credit scores, your $40,000 loan might get an approximate interest rate of 5% with payments of $ 424 per month fixed for 10 years or $264 per month for a 20 year loan. The interest portion of your payment would be tax deductable and the lender would take a mortgage on your home for security.
These loans take 3-4 weeks to close because they require an appraisal, title work and closer scrutiny.
Unsecured Signature Loans. If you don't have enough equity in your property or otherwise don't want to grant a second mortgage on your property, securing a pool loan will require an excellent credit score and debt to income ratio and the interest rate will be higher.
Unsecured signature loans as of December 1, 2016 have a fixed interest rate ranging from about 6.50% to higher. The lending institutions are more "stringent" on your credit score with most requiring a 700 or better to apply for the better rates. The lender will be hoping for a debt to income ratio of 45% or better to get the better rates. The interest you pay is NOT tax deductable but fortunately most loans can be stretched out for up to 12 yrs. A $60,000 12 year fixed rate loan at 6.50% would require monthly payments of $555.
Unsecured loans may take as little as a week, from the date of full application, to fund.
For ALL Central Indiana residents....after checking with your current lenders you may want to also compare programs with the following lending institutions:
Key Bank: (home equity and unsecured loans)
Brendan Norman, 317-464-8007
Light Stream Financial (a Division of Sun Trust Bank) (unsecured loans):
With Perma Pools, your saleman can further talk to you about these two lenders and can give you some more thoughts about the current state of pool financing.
I hope this information was helpful as you begin the process of securing the needed funds to build your dream pool for your family!!