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Australians have the greatest ratio of pool ownership in the world and many of us dream of either building or renovating our home to have a pool for the family to enjoy.
When it comes to financing the dream, the first thought may be adding the pool cost to the mortgage, which may necessitate a refinance. But is that really the best option?
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Existing homeowners or investors may have hit an LVR ceiling when they acquired the property, so rolling the costs of pool and landscaping into the mortgage could make pool ownership more expensive than previously thought. The other option may be savings, but given the pool and landscaping can cost anywhere from $20,000 - $60,000 plus, this will take some time and discipline.
Financing the pool and landscaping through a personal loan may be the right choice.
Let’s look at an example.
The interest payable on 25-year loan for a loan of $300,000 with a mainstream bank lender is around $273,000, depending on interest rates and if they pay fortnightly or monthly. If you add $50,000 to cover a pool and landscaping, this will increase the interest payable to nearly $319,000 – an extra $46,000. This is without factoring in LVR should the refinance go above the 80 per cent mark.
However, if your client took out a seven-year personal loan of $50,000 at a rate of 11.99 per cent, the interest would only cost them approximately $24,000. Despite the headline interest rate being higher, the total cost savings to the client should be easy to explain.
By choosing a personal loan instead, you have the opportunity to save your client money – avoiding excessive charges and unnecessarily adding to their mortgage repayments. It also gives the client extra flexibility and choice.
While it may not make the most money for you in the short term, a personal loan may be the right option for your client. In my experience, if you do right thing by the client and demonstrate commitment to the relationship and the value of working with you, then ultimately it will be the right thing for your business.
