How important is it to you that your dream garden include its own own swimming pool? If that’s the case, one of your first considerations should be how you’ll cover the cost.
Once you begin looking, you will find a plethora of options on where to go for funding. You should be aware, however, that some of the available loan options include higher interest rates and might lead to a greater financial commitment. Therefore, it is up to you to carefully analyse each option and choose the one that best suits your needs.
Cash-Out Refinancing
The first option we’ll explore to fund your pool is a cash-out refinance.
The Thing Itself
A mortgage refinance occurs when an existing loan is paid off and replaced with a new one. If you refinance your mortgage, you may be able to reduce both your interest rate and your monthly payment. In certain cases of mortgage refinancing, the borrower is given a monetary incentive proportional to the amount of equity in the refinanced property. The funds are yours to do with as you like, whether it debt reduction, house repairs, or a whole new swimming pool. Best options are there for pools financing now.
To qualify for a cash-out refinancing, you need to have a particular level of equity in your house. That’s the collateral for the loan, so you better make sure it’s in good shape. For instance, if you had a mortgage loan of $150,000 on a house that is now worth $250,000, you have $100,000 in home equity, or 40% of the total value of your home.
Make a Choice
Experts recommend preserving at least 20% of the equity in the home after the refinancing, even if there are lenders that would take less. According to the prior scenario, this means you qualify for a loan of up to $50,000. Taking out this loan would result in a new mortgage for $200,000, the sum of the current $150,000 loan plus the additional $50,000. At the closing, you will get a $50,000 cheque. Closing costs, which may be anywhere from three percent to six percent of the loan amount, are still your responsibility even if you finance the rest of the loan.
One major perk of cash-out refinancing is the opportunity to borrow up to 80% of the equity in your home. Some other benefits are: If you’ve been living in your home for some time or put down a sizable amount of money, you probably have more than enough savings to pay for a swimming pool. However, that’s not the only perk you could get. Here are a few more examples:
- Make the change from an adjustable-rate mortgage to a fixed-rate one.
- Attempt a mortgage refinancing. Remove the added expense of mortgage insurance.
- Get rid of a co-signer on your mortgage.
If you have enough equity to cover the cost of a pool and cashing out is in line with your long-term financial goals, it may be a good time to do so, given the current low interest rate environment.
