First time building a pool. Have options to finance or pay cash. Want this to be considered an investment and increase the value of property. Taking a poll - did you finance or pay cash? Also. What are the typical payment terms (i.e. 50% down, then 50% once completed)?
Should I finance the costs of building a pool or should I pay cash
- Thread starter Ssalter98
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Cash if you are able to. Re-pay your savings account the principal + interest that you would be paying the bank if you had borrowed.
It really depends on your finances. There are tax implications if you take out a home mortgage to finance it, and you need to consider the potential income you might get from investing the money vs. spending it on a pool.
Cash is better. Bank paying you minimal interest. Plus if you deal directly with subs, they will give you cash discount. If you are going thru a pool builder, once you settled on the price, ask for a cash discount.
Hard to really make that kind of determination without more information. It depends on how you would obtain the financing, at what rate, etc. I'm not a personal finance expert by any stretch of the imagination, but here's my .02.
I'll tell what we're doing. We have the ability to pay cash for it, but instead we are taking out a home equity loan with a rate of 3.375% on our existing 15 year mortgage. With the ability to deduct the interest, our effective tax rate on this mortgage will be around 2.511%. So with the ability to make at least 6-7% in the market, I'd coming out ahead with investing that difference...plus having more available cash in case of an emergency.
Now, if you are obtaining financing through other means that isn't deductible, and it is a higher interest rate...then it would probably make more sense to pay cash for it. So there are different factors to consider. Good luck!
I'll tell what we're doing. We have the ability to pay cash for it, but instead we are taking out a home equity loan with a rate of 3.375% on our existing 15 year mortgage. With the ability to deduct the interest, our effective tax rate on this mortgage will be around 2.511%. So with the ability to make at least 6-7% in the market, I'd coming out ahead with investing that difference...plus having more available cash in case of an emergency.
Now, if you are obtaining financing through other means that isn't deductible, and it is a higher interest rate...then it would probably make more sense to pay cash for it. So there are different factors to consider. Good luck!
rodog123
0
This depends on your cash flow. If you have the means to pay cash do it, but make sure you will not miss that stockpile of cash. We financed @ a 3% rate over 15 years no penalty to pay off early.
being I am a Dave Ramsey follower....cash is king and I would never pay interest to anybody for anything. But like other posters said, it's a personal decision and a tough one, just be smart and use good common sense.
I will say this, if you even have the slightest inkling you might sell your house in the future, a pool is a bad investment money wise and you will never re-coup the money you have in it. My .02
I will say this, if you even have the slightest inkling you might sell your house in the future, a pool is a bad investment money wise and you will never re-coup the money you have in it. My .02
We financed our pool build and while we have no problem with the terms and will pay it off in less than a year, I wish we hadn't financed. The bank is still going to get thousands of dollars in interest and for are particular situation, only a small amount of that will be tax deductible. You have to be really careful with HELOCs as the details vary a lot depending on your personal financial situation and banks LOVE to give you the shpeel about what a great tax advantage it is.
Also, forget about "adding value to your home" thing. Unless you're flipping the house in the next couple of years, the depreciation of the pool and it's on-going annual expense will do nothing for your property value over the long-term. As well, some people buying homes actually DON'T want pools. Kitchen and bathroom remodels do way more for resale value than pools do.
For PB payment schedule, we had an excellent PB and he did 30-30-30-10. 30% down, 30% at start of Gunite, 30% at start of PebbleTek, final 10% at pool open / punch list completion. Also, definitely see if you can pay cash as many contractors love that.
A side conversation on being your own general contractor was moved to here. JasonLion
Please don't get snookered into the idea that you can borrow money at low interest and then use your own money to invest and make more money. Few people have the discipline to do that and many borrow money only to use it all up and then have to dip into savings to cover other "cost" from the job as well. You are much more careful about things when you have to spend money that you earned
Also, forget about "adding value to your home" thing. Unless you're flipping the house in the next couple of years, the depreciation of the pool and it's on-going annual expense will do nothing for your property value over the long-term. As well, some people buying homes actually DON'T want pools. Kitchen and bathroom remodels do way more for resale value than pools do.
For PB payment schedule, we had an excellent PB and he did 30-30-30-10. 30% down, 30% at start of Gunite, 30% at start of PebbleTek, final 10% at pool open / punch list completion. Also, definitely see if you can pay cash as many contractors love that.
A side conversation on being your own general contractor was moved to here. JasonLion
Please don't get snookered into the idea that you can borrow money at low interest and then use your own money to invest and make more money. Few people have the discipline to do that and many borrow money only to use it all up and then have to dip into savings to cover other "cost" from the job as well. You are much more careful about things when you have to spend money that you earned
Sunny is correct about the investment vs cash aspect if you aren't disciplined enough to invest the difference. Dave Ramsey followers will balk at the idea of paying interest for anything, which works for most people. However, if you look at the objective math of it, with how dirt cheap money lending is right now...it makes sense to finance in some situations and invest the difference, IF you have the discipline to do so. If not, then absolutely yes pay cash for it and you are guaranteeing a savings of not paying anyone any interest.
+1
I also see it as a difference on time scales as well. Good solid investment strategies yield good returns over long time horizons.
Your debt interest payments kick in right away. The only way to make fast money with high yield is to use very risky short term investments which typically endanger the principle. So it can easily go the other way - in order to make fast returns you could lose your shirt in the process
I financed it through a bank that specializes in pool loans. Since it was a new house and we paid less than 20% down, a HELOC was not an option.
We took out a 12 year term, but planned to pay the loan off within 6 months. It was a HUGE chunk of our budget, and it strained our finances a bit, but we wanted to get rid of the debt as quickly as possible.
As of today, I have it paid off fully! Now I can enjoy the pool without worrying about the payments!
EDIT: If you don't have the cash to pay outright, or enough money at the end of the month to plow it to your pool loan, DON'T get a pool.
We took out a 12 year term, but planned to pay the loan off within 6 months. It was a HUGE chunk of our budget, and it strained our finances a bit, but we wanted to get rid of the debt as quickly as possible.
As of today, I have it paid off fully! Now I can enjoy the pool without worrying about the payments!
EDIT: If you don't have the cash to pay outright, or enough money at the end of the month to plow it to your pool loan, DON'T get a pool.
I financed it through a bank that specializes in pool loans. Since it was a new house and we paid less than 20% down, a HELOC was not an option.
We took out a 12 year term, but planned to pay the loan off within 6 months. It was a HUGE chunk of our budget, and it strained our finances a bit, but we wanted to get rid of the debt as quickly as possible.
As of today, I have it paid off fully! Now I can enjoy the pool without worrying about the payments!
EDIT: If you don't have the cash to pay outright, or enough money at the end of the month to plow it to your pool loan, DON'T get a pool.
Excellent job paying off the debt!! It is very nice to swim in a pool that you know you own.
However, I think few people can muster the discipline you showed in your repayment and that's the trap that most people fall into as life always brings in new challenges and needs that could easily derail a "we'll repay it off faster than the loan terms" strategy.
THIS. I cannot stress this enough. Even for myself and my wife, it was hard. Very hard. We exercised incredible restraint on our spending, and even so, we went over budget on other items because we were very adamant on getting rid of this debt as soon as possible. Now that we have more control over our finances, we can give ourselves a little more leeway on our regular budget items, while replenishing our savings.
Thinking about getting a pool requires oneself (or couples) to really be honest with themselves while assessing their ability to pay it... and that can be an unpleasant experience for some people.
For this reason, I cast my vote for Cash.
We financed about 75% of the cost through a HELOC. As other posters have said, it really depends upon your situation. We would never have gone ahead and built a pool in our present situation, but we had a good 25% of the pool paid for via an insurance claim. In this case, since we wanted an in ground and we had the equity in our house, we used it to finance the pool. However, it easily fits in our budget to repay it. We have a low mortgage payment and no additional debt. We'll probably try and pay off the loan within 3 years, because my husband hates being in debt, so we'll cut out a lot of wasteful spending to manage that. If you don't have the cash, and you have to juggle actual bills to try and afford it, I wouldn't even think about it.
Cash, in my opinion is always best (someone mentioned Dave Ramsey).....we are just the debt free type.
My word of caution would be on expecting to increase your homes value with a pool addition. It "may" be possible but isn't the norm where I am geographically. We knew this going in (hubby is a real estate appraiser). Unless you have professionals in the real estate business (either agent or appraiser could probably do a brief assessment) don't assume that a pool increases your homes value.
We re-fied after our pool build into a 15 yr. NO ADDED value from pool. Of course my husband wanted to disagree with that appraisal(on more than the pool), but I assure you the bank didn't.
My word of caution would be on expecting to increase your homes value with a pool addition. It "may" be possible but isn't the norm where I am geographically. We knew this going in (hubby is a real estate appraiser). Unless you have professionals in the real estate business (either agent or appraiser could probably do a brief assessment) don't assume that a pool increases your homes value.
We re-fied after our pool build into a 15 yr. NO ADDED value from pool. Of course my husband wanted to disagree with that appraisal(on more than the pool), but I assure you the bank didn't.
Agreed
Had an appraisal done shortly after our pool build was complete and I talked with the appraiser. He told me flat out that our pool probably only made a marginal increase in our home value as compared to similar homes in the area but since few in our HOA have pools he said that it was probably a plus for sellability.
So definitely got very little REAL value-add out if it from a purely financial perspective.
+1^^^^^^^
I think it is rare (from my husbands stories)to increase home value from a pool. I'm reluctant to say that because I know it can depend on the quality of pool as well as geography.
This is why I say to the OP that you just can't assume that. You should get professional confirmation (from an appraiser or realtor)prior to build if that is your expectation our you may be hugely disappointed.......maybe not though.
We knew going in that the expense was pretty much for a hole in the ground that the family could enjoy. And it has been worth it to us.
I think it is rare (from my husbands stories)to increase home value from a pool. I'm reluctant to say that because I know it can depend on the quality of pool as well as geography.
This is why I say to the OP that you just can't assume that. You should get professional confirmation (from an appraiser or realtor)prior to build if that is your expectation our you may be hugely disappointed.......maybe not though.
We knew going in that the expense was pretty much for a hole in the ground that the family could enjoy. And it has been worth it to us.
I have to agree with others also. Cash is best option if able to do it. It helps keep you on budget and prevent you from going overboard on the design and options. We set our budget and nailed it dead on and I think paying it cash helped.
We also contacted the real estate agent that sold us our house ahead of time to get her opinion and essentially she told us "If I can't sell your house then I'm going to ask you to fill it in!!" Needless to say we know it won't add value and could make it harder to sell one day but its been a blast to have.
Having said that we hard our financial "house" in order before the luxury of a pool. Made sure we completed our minor kitchen and master bath remodels, new appliances done, all HVAC and water heater units new and good, such that the pool would be the last item we wanted knowing the cost and lack of value it brings to a house while not having to worry about major "must have" house projects pop up.
We also contacted the real estate agent that sold us our house ahead of time to get her opinion and essentially she told us "If I can't sell your house then I'm going to ask you to fill it in!!" Needless to say we know it won't add value and could make it harder to sell one day but its been a blast to have.
Having said that we hard our financial "house" in order before the luxury of a pool. Made sure we completed our minor kitchen and master bath remodels, new appliances done, all HVAC and water heater units new and good, such that the pool would be the last item we wanted knowing the cost and lack of value it brings to a house while not having to worry about major "must have" house projects pop up.
^^^^ Excellent post above
Definitely our experience too! Really wish I had done some other home improvements first before the pool. Nothing major or falling apart, just a few things interior-wise I wish I could change out now with higher quality stuff.
Definitely our experience too! Really wish I had done some other home improvements first before the pool. Nothing major or falling apart, just a few things interior-wise I wish I could change out now with higher quality stuff.
Disclaimer.... Debt requires discipline. If you're not disciplined, don't go into debt.
Any financial wiz worth their salt will tell you you're better off financing at today's interest rates especially if it's via a home equity (tax deductible) loan. Adjusted for inflation, you're basically getting free financing if not free money (if you know how to invest the non-financed amount). Also, you're deferring the financial risk of the overall real estate value of your property to your bank. So.... if your property value goes down and / or you find yourself in foreclose due to a bad economy (or otherwise), all your eggs are not in the pool. That math and risk avoidance factor favors financing.
Any financial wiz worth their salt will tell you you're better off financing at today's interest rates especially if it's via a home equity (tax deductible) loan. Adjusted for inflation, you're basically getting free financing if not free money (if you know how to invest the non-financed amount). Also, you're deferring the financial risk of the overall real estate value of your property to your bank. So.... if your property value goes down and / or you find yourself in foreclose due to a bad economy (or otherwise), all your eggs are not in the pool. That math and risk avoidance factor favors financing.