Pool Finance Optimization
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- Posts: 46
- Joined: Sun Feb 22, 2015 9:24 am
Pool Finance Optimization
First off, I’m thankful for the forum and ability to have options. This forum got me to the point where I was comfortable pulling the trigger on a custom pool build (long term family return outweighs long term financial cost). No debt/loans other than mortgage.
I’m midway through a pool build and initial “plan A” HELOC application is going slower than expected (started end of May and waiting on appraisal). I’ve had a HELOC with this bank previously and it went very smooth and I paid it off a couple years back. I should have started this before signing contract, but wasn’t expecting the build to be so quick due to supply chain issues. Lesson learned. I am looking for plan B as backup in case the HELOC isn’t completed in time to meet payment.
Pool finance “plan B” options (typical stellar boglehead credit rating)
1) 401k loan
2) Roth IRA distribution (contributions only)
3) Increase cash flow by transitioning bills to 0% credit card ($400 fee).. gets me up to 75% cash (in past decade, never had a recurring monthly payment, always paid in full)
4) Pool loan (~5.5% fixed, 15 yr, 2k baked in cost)
5) HELOC (3.5% adjustable, no cost, started app today)
6) Hybrid of 3 and another option
7) Stop 401k contributions temporarily (misses out on ~$500/mth company match, and adds about 10%)
8) Hybrid of 7 and another option
9) other? (since this is the boglehead forum, just wanted to say that cancelling is not under consideration!)
10) cash out refi up to 80% LTV
I have about 50% of the build cost in cash at the moment using cash out refi (69% LTV) from April. Build schedule is unknown and contractor isn’t the most responsive, but I am guessing I will need the additional 50% by September or risk more delays/build costs.
What is the lowest cost plan B option and/or am I missing others?
I’m midway through a pool build and initial “plan A” HELOC application is going slower than expected (started end of May and waiting on appraisal). I’ve had a HELOC with this bank previously and it went very smooth and I paid it off a couple years back. I should have started this before signing contract, but wasn’t expecting the build to be so quick due to supply chain issues. Lesson learned. I am looking for plan B as backup in case the HELOC isn’t completed in time to meet payment.
Pool finance “plan B” options (typical stellar boglehead credit rating)
1) 401k loan
2) Roth IRA distribution (contributions only)
3) Increase cash flow by transitioning bills to 0% credit card ($400 fee).. gets me up to 75% cash (in past decade, never had a recurring monthly payment, always paid in full)
4) Pool loan (~5.5% fixed, 15 yr, 2k baked in cost)
5) HELOC (3.5% adjustable, no cost, started app today)
6) Hybrid of 3 and another option
7) Stop 401k contributions temporarily (misses out on ~$500/mth company match, and adds about 10%)
8) Hybrid of 7 and another option
9) other? (since this is the boglehead forum, just wanted to say that cancelling is not under consideration!)
10) cash out refi up to 80% LTV
I have about 50% of the build cost in cash at the moment using cash out refi (69% LTV) from April. Build schedule is unknown and contractor isn’t the most responsive, but I am guessing I will need the additional 50% by September or risk more delays/build costs.
What is the lowest cost plan B option and/or am I missing others?
Last edited by SteadyWins on Fri Jul 30, 2021 6:30 pm, edited 1 time in total.
Re: Pool Finance Optimization
How long do you expect to take to pay it off?
Some of the options you listed don't seem realistic for a longer time period... (Unless they were to "bridge" you until you got simmering what in place.)
Could you do a cash out refinance of mortgage?
Do you have any taxable assets you can draw from?
Some of the options you listed don't seem realistic for a longer time period... (Unless they were to "bridge" you until you got simmering what in place.)
Could you do a cash out refinance of mortgage?
Do you have any taxable assets you can draw from?
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- Posts: 46
- Joined: Sun Feb 22, 2015 9:24 am
Re: Pool Finance Optimization
I’m not in a rush to pay the pool off and fine with paying low interest atm. The shorter term options can be considered a bridge and would be paid in full in under a year.
A cash out refi is another option (current mortgage is fixed at 2% 15 yr, a few months in).
All investments are in tax advantaged accounts.
A cash out refi is another option (current mortgage is fixed at 2% 15 yr, a few months in).
All investments are in tax advantaged accounts.
Re: Pool Finance Optimization
Is that 6 months, 6 years, 6 decades?SteadyWins wrote: ↑Fri Jul 30, 2021 6:19 pm I’m not in a rush to pay the pool off and fine with paying low interest atm. The shorter term options can be considered a bridge and would be paid in full in under a year.
A cash out refi is another option (current mortgage is fixed at 2% 15 yr, a few months in).
All investments are in tax advantaged accounts.
Assuming it's greater than 2 years, I'd be looking at cash out refinance if that's an option. Likely your lowest rate (and lowest payment if you keep to roughly the 15 year mark).
IIRC everything else on your list was variable rate, if inflation keeps going up that 3.5% HELOC could get pricey... (As could other variable rates.)
If you haven't owned a pool before, make sure you are planning for ongoing costs... We've had one for 20 or so years, and invariably every few years there a major expense. Could be replacing a pump... Could be replacing the liner (ours was ripped by animal in our back yard )... And sometimes more then one thing at once... So make sure you budget accordingly so you aren't caught off guard (hopefully you'll have a few years on a "new" pool...).
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- Posts: 46
- Joined: Sun Feb 22, 2015 9:24 am
Re: Pool Finance Optimization
I’m on it!grkmec wrote: ↑Fri Jul 30, 2021 6:37 pm Apply for HELOC at Third Federal - rate is 2.24%
https://www.thirdfederal.com/borrowing/home-equity
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- Posts: 46
- Joined: Sun Feb 22, 2015 9:24 am
Re: Pool Finance Optimization
Not to exceed 15 yr. I’ve had an above ground previously but not nearly as pricey as concrete pool with attached spa, saltwater, pavers, and fence will keep a rainy day fund set aside moving forward.SnowBog wrote: ↑Fri Jul 30, 2021 6:32 pmIs that 6 months, 6 years, 6 decades?SteadyWins wrote: ↑Fri Jul 30, 2021 6:19 pm I’m not in a rush to pay the pool off and fine with paying low interest atm. The shorter term options can be considered a bridge and would be paid in full in under a year.
A cash out refi is another option (current mortgage is fixed at 2% 15 yr, a few months in).
All investments are in tax advantaged accounts.
Assuming it's greater than 2 years, I'd be looking at cash out refinance if that's an option. Likely your lowest rate (and lowest payment if you keep to roughly the 15 year mark).
IIRC everything else on your list was variable rate, if inflation keeps going up that 3.5% HELOC could get pricey... (As could other variable rates.)
If you haven't owned a pool before, make sure you are planning for ongoing costs... We've had one for 20 or so years, and invariably every few years there a major expense. Could be replacing a pump... Could be replacing the liner (ours was ripped by animal in our back yard )... And sometimes more then one thing at once... So make sure you budget accordingly so you aren't caught off guard (hopefully you'll have a few years on a "new" pool...).
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- Posts: 46
- Joined: Sun Feb 22, 2015 9:24 am
Re: Pool Finance Optimization
Update: 3rd federal appraisal complete and now on to underwriting. Also taking the hybrid approach, by obtaining 4% 3 yr light stream pool loan and Amex providing a one click CC promo to 0% for 12 months, since HELOC could take months.SteadyWins wrote: ↑Fri Jul 30, 2021 6:47 pmI’m on it!grkmec wrote: ↑Fri Jul 30, 2021 6:37 pm Apply for HELOC at Third Federal - rate is 2.24%
https://www.thirdfederal.com/borrowing/home-equity
Re: Pool Finance Optimization
My Federal Third HELOC app went to underwriting around April 29 and I closed on Monday. It got through underwriting in about 30 days but the reset of closing took much longer.
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- Posts: 46
- Joined: Sun Feb 22, 2015 9:24 am
Re: Pool Finance Optimization
It is. I just closed a TF HELOC this week that I started on in May. And I’m a repeat TF customer.
In my case, using it to float the upfront cost of a rooftop solar install while I wait for the tax credits with next years return…