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Thinking
about Pool Finance
If you are like the majority of swimming pool buyers, you probably need a
little help from a financial institution to make it all possible. The
following notes may be helpful to your consideration of this important
matter.
Spending
or Investing?
It is important to realise that you are not planning to spend money
on a consumer product. Most consumer products devalue as soon as you walk
out of the shop and continue to do so throughout their lives. Not so with a
new swimming pool. You will be investing in additional assets.
Adding
to your Assets
The pool you are about to acquire will greatly increase the value of your
home, an increase which will be realised whenever you sell your property.
Alternatively the increased value of your home will allow you to borrow more
money against it if ever you wish to do so in future. Perhaps you will want
to add a home extension, buy a business or borrow extra working capital for
an existing business.
Your
Best Option
In all probability the Bank or other institution who holds a mortgage over
your home will be the best source of new swimming pool finance. There are a
number of good reasons why this would be the case. For example:
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A new swimming pool will
add value to the same asset which secures your existing mortgage.
From your bank's point of view this helps to justify a further
advance, subject of course to normal bank guidelines. |
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Because your existing lender
already holds a mortgage over your property there is minimal fuss
and minimal costs involved in a loan increase. |
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Your current lender already knows
your track record and also knows a great deal about your various
assets, liabilities and income sources. Provided your existing
relationship is in good shape, this will help to fast track your
extra loan application. |
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Because your home mortgage probably
has many years to run, adding on to the original loan will spread
the extra payment commitment over a long period thus making it much
easier on your pocket. |
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In all probability, the interest
rate on your mortgage will be far lower than that applicable to any
Personal Loan or Second Mortgage financing, as well as being easier
to arrange. |
The
Extra Commitment
If you will be borrowing some money to finance your new pool you will
naturally be interested in knowing how much extra monthly commitment this
might involve. As a very rough guideline, the table below will help
give you a quick approximation depending on the amount you wish to borrow,
your current interest rate and the remaining term of your mortgage.
The
table assumes you would be paying off both interest AND principal. However
there are other bank products which allow you to repay interest only and
these result in a much lower monthly commitment. Figures
below are very rough. Contact your lender for precise calculations.
Principal
and Interest - Approx per month per $1,000 borrowed
| Remaining
Term |
if
6% interest |
If
8% interest |
if
10% interest |
| 5
years |
$19 |
$20 |
$21 |
| 10
years |
$11 |
$12 |
$13 |
| 15
years |
$8 |
$10 |
$11 |
| 20
years |
$7 |
$8 |
$10 |
| 25
years |
$6 |
$7 |
$9 |
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