With the war and the fear of terrorist reprisals keeping people closer to home these days, now might be an opportune time to build that backyard swimming pool you've always dreamt about. Especially with interest rates bouncing around at historic lows.
Actually, many folks pay cash for their pools. But if you have to rely on financing to get exactly what you want, there are plenty of choices. Here's a look at your options:
Obviously, the easiest way to pay for your new pool is to roll the cost into the price of the house. No muss, no fuss.
But beware, warns Lynn Feldman, vice president of Florida Pools in Casselberry, which built Tiger Woods' pool and those of many other Central Florida celebrities: Most tract builders will require you to choose from their lists of approved pool contractors, which means you could be paying more than you otherwise might if you could scout the field for the best deal.
Still, that's not all bad. For one thing, the builder will act as your general contractor, making sure the pool guy does the work right and on time. For another, your lawn and sprinkler system won't be torn up like it might if you waited to put in your pool until after you moved in.
Best of all, though; you'll have just one mortgage and at the lowest rate possible.
But again there's a caveat: You could be paying for the pool for 30 years, and that could be expensive. Very expensive, indeed, says Terri Zucchi, who has been arranging pool financing for Good Faith Mortgage Services in Altamonte Springs, Fla., for the last 10 years.
Even though mortgage rates are the lowest they've been in four decades, you could easily spend twice as much by paying for it a month at a time for 360 months.
For example, a $25,000 pool financed over 30 years at 5.5 percent would add $142 a month to the cost of your mortgage. Sounds reasonable enough. But over 30 years, the total cost for interest and principal would be a whopping $51,102.
That's why Zucchi always recommends opting for a 15-year mortgage. Over 15 years at 5 percent, that same $25,000 pool would cost $198 a month.
Yes, that's $56 more each and every month. But over the entire term, the cost would be "just" $35,586, resulting in a savings of $15,516.
Here the choices are a second mortgage or a line of credit based on the equity you have in the house.
While the rate on a credit line is usually lower -- if you have good credit, you can get one at prime, which is the rate bank's charge their best customers -- it is more expensive because interest is compounded monthly instead of annually.
The minimum payment on these revolving accounts is 1.5 percent times the balance. So, by paying the least amount required, the monthly cost for a $25,000 line of credit would be $375. At the same time, though, the unpaid balance will be marching upward at 4.25 percent a month.
You might have to pay 7.5 percent for a 15-year home improvement loan. But the payment would be just $232 a month, which is "a big difference for most people," says Zucchi.of Good Faith Mortgage.
Of course, you can always pay off the credit line sooner. But you can do that with any loan.
Another worthy choice is a home improvement loan with a shorter term. A 7.5 percent, $25,000 loan will run you $297 a month for 10 years and $501 a month for five years.
As you can see, the monthly payment increases as the term decreases. But the overall savings grows.
If you have little or no equity, the differences between lines of credit and second mortgages are moot. You'll have to go with a second.
But Feldman of Florida Pools suggests that when your pool is finished, have your property reappraised. Chances are, she says, that your addition will add enough value to make it worthwhile to refinance both loans into a brand new first mortgage.
"You might have to pay a few extra points (a point is equal to 1 percent of the loan amount) by doing it that way," she says. "But it's better than paying two mortgages and you might even end up with a lower rate than you had in the first place."
Depending on how extensive the work, you might want to pay for the renovation in cash. Or perhaps even a credit card.
Florida Pools and many other pool builders don't accept credit cards because they would have to charge people more to over the fees card issuers charge them. Besides, Feldman thinks "you gotta be nuts" to pay with a credit card.
"At the rates they charge, I'd sure tell my customers not to do that," she says.
Perhaps, but Diane Leider, who is in charge of the Mill Creek Bank's "AquaVantage" credit card program, says the St. Paul, Minn., institution has financed 50,000 above ground pools and spas over the last five years to the tune of $500 million.
The bank, which works through 1,500 dealers nationwide, promises quick "on the spot" approvals at rates ranging from 12.99 to 19.99 percent, depending on the applicant's credit history.
That's high by mortgage standards. But there are benefits, says Leider. "It's fast and easy, there are no annual fees or prepayment penalties, payments can be as low as 2 percent of the balance, and it doesn't tie up other lines of credit you may need for emergencies or other uses."
A credit card may be a valid choice if your remodel will run only a few grand. But if you're going whole-hog redoing the deck, for example, adding a spa and building a pool house stick with either a line of credit and a second mortgage.
Whichever route you take, though, Florida Pools recommends sticking with a lender that's familiar with swimming pools and won't string out the approval process for several weeks.
A good pool lender should be able to let you know one way or the other in no more than five days, says Feldman. And if it's a go, you should be able to close within two weeks.