Financing your swimming pool

[South_Texas_Sun]

If you have your house paid for, financing might not be that bad, but if you are basing the loan amount for a second (or third) mortgage on the current price of housing, you might just consider what happens if real estate prices drop (or heaven forbid....plummet)

Having been through 4 housing drops now, I can tell you that it's no fun. People offering their houses for sale at "ridiculous" prices, and still no buyers. The market becomes awash with houses for sale and with the recent legislation making it much harder to discharge debt (bankruptcy) there's going to be a lot of long faces when the current mania stops in housing and everyone's looking for a chair at the same time in this global version of musical chairs.

No down payment loans, interest ONLY loans, mortgage loans to illegal aliens(!), first time buyers expressing relief at "getting in" to the market because it's "just going to go higher".........these are ALL red flags waving at the top of the largest housing bubble in history.

You can argue all you want. This is way it ALWAYS looks at the top, and if there wasn't disagreement about the future, there wouldn't be a "market." (so save your breath, I know all the contrary arguments.)

Not trying to be an alarmist, but arguing that financing is BETTER than paying off a debt is just another sign of mania, imo.

Some of the dumbest things I've ever done, were done on "credit". Your results may vary.

[adillenal]

I guess I am totally out of it but I didn't even know you could have a 3rd mortgage.
Anyway, I have a savings account but I also wanted a pool but knowing myself as well as I do, realized that if I used my cash for the pool I would probably NEVER build my savings up again. ( Mainly because I never saved it in the first place. It was a windfall from a relative) So, I borrowed against my own money. I make monthly payments, my savings account is my collateral and I will end up with a paid for pool and my savings intact. Bank was happpy to do this since it is a no lose situation for them. Add on automatic pay and we have our own little back yard oasis for us and our teenager and all of his friends.
Too much debt right now scares me and I have to agree with South Texas Sun. I remember the last time the housing bubble burst here in Texas. I had friends that owed way more than their house was worth.
But a pool is comparable in cost to a car. My Excursion and my pool cost the same thing. I sure hope the pool lasts a lot longer.
Just thought I would throw out another option.

[GTakacs]

If you have your house paid for, financing might not be that bad, but if you are basing the loan amount for a second (or third) mortgage on the current price of housing, you might just consider what happens if real estate prices drop (or heaven forbid....plummet)

I guess I still don't see what the houseing price and market value of my house has to do with the fact that I'd rather finance a pool for 15 years as a 3rd mortgage instead of saving up for 9 years before I could get one paid for with cash.

A Pool is NOT and investment! A house is NOT an investment! The best thing that could happen for me right now is a big ass inflation with my wage following it. A Pool does not add any value to the house (some parts of the country it's even a huge detriment) so you might as well write it all off. I figred if I pay $40k for something I might as well enjoy it as long as I can. As for a house not being an investment: if you live in a nice house now and it appreciates greatly in the next 10 years, guess what the rest of the houses will be doing, including your next dream house? They'll go up in price just as well. So if you sell yours then you'll have to shell out a lot more for your next one. Unless you're planning to downsize after the big price hike then upsize again after a downturn and love to move with all its associated fun and expense, I would not consider buying a house an investment. Anyone telling you that a house (primary residence) is an investment is lying!

I just bought a house that I plan to send my kids to college from (right now I only have one, he's 18 motnhs old) so I don't care about the market value of my house or where it's headed. I don't plan to borrow against its value any time soon (3 mortgages are enough) so who cares what the value is or if I'm upside down right now?

Both me and my wife are professionals so I really don't think we'll have to find a new job any time soon or if we do it'd be all that hard.......

I guess we got pretty off topic here, but as long as the price of borrowing money is as low as it is right now, I don't see any reason not to do it.

[Jeffski]

Disagree. Real estate is almost always a good investment. The increased equity in your first house is going to help you buy your second. True, the value of your second home has risen probably equal to your first, but would you be able to afford it without the equity from your first house? Most people wouldn't.

[South_Texas_Sun]

Both me and my wife are professionals so I really don't think we'll have to find a new job any time soon or if we do it'd be all that hard.......

Lol......famous last words. A house, yes, even the one you live in, is a commodity, no different than pork bellies (which you could, in theory, eat) but with one important difference. It's a LOT less liquid! (no pool pun intended )

I would imagine, since this is a pool forum, that most people here are professionals or at least self employed with enough net worth to own their own home. (otherwise, they'd be building a pool for the owner, right?)

So this cautionary thread applies to anyone who is cavalier enough to buy a pool, financed or not. The pool you build is a depreciating asset with monthly costs attached, not unlike an automobile which is also an investment, but a very poor one if you buy one with a bad resale value. (like say, a gas guzzler right now)

But this brings up an important point.

Projections of the future always assume that things will continue as they currently are. This is almost always a logical fallacy, and it's well worth your time to consider the opposite. For example, what happens if your professional job becomes worth less because of competition. And the housing market DROPS 25% instead of gaining, so you go to sell your house to move to a better location for work, and guess what? You're 25% in the hole, instead of in the black.

Instead of inflation, you get recession, deflation, or even depression. (not far fetched despite all the talk of "it's different this time".)

Please understand, I'm not wishing this for ANYONE, it's just that this current environment should raise some caution amongst borrowers. Don't EVER borrow money if you have the assets to pay in cash! It's the principal of the "magic of compounding interest", but working AGAINST you instead of FOR you!

I know, it sounds "fuddy-duddy-ish", but anyone who's ever gotten in financial trouble (or read enough history) has learned this lesson.

All that said, we're currently building a very nice pool, but paying cash and trying to pay off all debts, because I personally believe that the economy is going to be "off" for a period in the not-too-distant future and cash/hard money assets will be king.

With over 30 TRILLION dollars in dollar-denominated consumer debt in this country, do you really want to want to be a net-debtor? Have you heard the expression, "all in the same boat?"

Just something to think about.