Lower interest mortgage rates have allowed many homeowners to refinance their mortgages and free up some cash. This is mostly through cash-out refinance, popularly known as “cash-out refi” in which homeowners can borrow against the equity in their homes. As a homeowner, you can use the money in a variety of ways, ranging from paying off debts and college expenses to repairing and renovating your home. Alternatively, you can also use the money to build a pool. Here are a few factors to consider when financing a pool into mortgage.

Financing a Pool Into Mortgage - Building Your Dream Backyard

There are a variety of advantages and disadvantages of when it comes to financing a pool into mortgage via cash-out refinances and other methods.

Advantages of Refinancing to Build A Pool

One of the most significant benefits of refinancing is to receive a lower mortgage rate. This means you get a lower overall loan cost, ultimately resulting in savings. Refinancing could easily all you to “cash out” with enough money to build a pool without increasing your mortgage payment or straining your budget.

Potential Disadvantages

Getting cash back in addition to your refinance may result in higher monthly mortgage payments. However, this depends on how much you take. The last thing you want is to reduce your savings due to a refinance.

Before financing your pool into a mortgage, weigh your options. Start by adding the fees and how much you’ll spend on building and maintaining the pool into the loan amount. If the total costs outweigh the benefits, then you’re better off seeking a lower mortgage rate or abandoning the plan altogether. The trick here is to fully analyze the numbers before determining if refinancing is an ideal option.

One of the best ways to go about this is to get loan estimates from several potential lenders. Ask for detailed total cost estimates so you can compare the fees before settling on a particular lender.

Is It Better Than A Home Equity Line on Credit?

Financing your pool into a mortgage may be a better option than a home equity line on credit (HELOC) if you plan to stay in your home for say five years or more and if the former option gets you a lower interest rate than your current rate. If your current mortgage rate is already low or you’re planning to move soon, then a home equity line on credit would be a wiser option. When deciding between the two options, you need to consider:

• Your current interest rate

• Income and debts

• Mortgage balance and remaining term

If the costs of building a pool are minimal, and your monthly payments are affordable, getting a HELOC may be more economical because some of the traditional fees won’t apply. The downside of getting a HELOC, however, is the obligation to pay a second, albeit smaller mortgage.

Bottom Line

When it comes to financing a pool into a mortgage it’s crucial to look at the interest rate as well as the fees. Some lenders have low-interest rates, but excessive fees. You may be tempted by the lower interest rates but the one-time fees can eat away at your overall savings. Compare each lender’s APR (annual percentage rate) because it combines both fees and refinance rates.