The pool industry has completely changed since the 2008 housing
crash. Before then, pool loans were most commonly secured with
second or third mortgages on the pool owner’s home. In late
2007, when these home values peaked and began their now historic
decline, many pool buyers were also recent home buyers; meaning
their pool purchase was made in the first two to three years of
their initial mortgage investment.
As housing values dropped, foreclosures increased and
investments in second and third high loan-to-value mortgages became
toxic. Almost all lenders were forced to step back. In home
improvement lending circles, pools were then considered a
notoriously bad investment. Pool construction fell along with other
new construction projects and home improvement store sales.
As we are all aware, as those real estate numbers tumbled and
job losses mounted, countless homeowners found themselves
underwater. Many walked away from their homes and their loans.
While long a residential mainstay because of their recreational
and fitness uses, pools have traditionally added significant appeal
to a home and its resale valuation. But the pallor cast on the pool
financing industry and the reason lenders were (and why some still
are feeling the effects of these losses) was never because of the
pool financing itself, but was instead a direct result of
homeowners who abandoned their upside-down mortgages.
The Tide Turns
Until the housing crash, pool financing was primarily a
mortgage-secured product funded by national banks offering low
rates and good terms that secured the loans with a second or third
deed of trust. The toughest years were 2008 through 2010, when
investors were just not willing to consider pool financing or most
second mortgages. There were some regional banks that stuck with
it, but not to the degree that would produce those previously
In 2012, with the housing market seeing some legitimate signs of
stabilization and lenders becoming more aware of the strength of
the pool financing market; providers are more consistently offering
pool financing. The rates may be a little higher, but they are
based on the credit worthiness of the actual borrower and not on
the property’s real estate assessment.
A few years ago, unsecured pool building loans were almost
unheard of, but are now the basis for much of the pool construction
industry’s growth. The rates on those loans are similar to
those for many credit cards.
For those homeowners willing and able to borrow to finance a
pool, the ideal loan comes from a company with experience lending
in the pool industry. Loans then can be tailored to the unique
demands of pool builders.
One way loans are tailored is to have them track the five phases
of pool construction: excavation, rebar, gunite, tile and decking,
and equipment and plaster. In this system, the pool builder is paid
when each of those phases is completed. The builder gets the final
payment when the pool is filled and the electrical system is
activated. With this method, the contractor is paid directly and is
protected from non-payment by a customer. In addition, the customer
is assured that the contractor has incentive to complete the
Unsecured loans tend to be made for no more than $30,000. In
most cases this covers the cost of buying a pool. For higher-end
projects we have found that the $30,000 unsecured loan works very
well as most borrowers are contributing sizeable down payments to
accommodate the more-expensive price tag.
Formerly, unsecured pool loans were completed by giving a check
for the total amount of the pool to the homeowner, who would then
pay the builder. This is still done in cases where a customer gets
a regular unsecured loan, rather than one tailored for the pool
industry. Fortunately now we see the opportunity to protect the
builder by funding to them directly.
In general, pool loans have been good risks for lenders. Pool
owners tend to make payments consistently and seldom have remorse
over the purchase.
There are still home equity loans for pools available in
markets, such as Texas, where there is lower unemployment than in
the rest of the country and home prices are rising. We are now
seeing lenders also consider adding back value for the pool project
thus making qualifying easier and in turn these lenders, based on
equity, are willing to make loans as high as $75,000.
This year alone we have processed more than $100 million in pool
loans and are witnessing a return of investors interested in these
loans as sound investments.