How to Finance Pond Construction
When you build a pond, you typically have to contend with a number of factors ranging from obtaining planning permission to ensuring you have a water supply that can easily reach the site of your pond. In addition to these costs, you also have to obtain some kind of financing if you lack the cash to pay for your pond out of pocket. When you take out a home equity loan or line of credit, your home and land secure the loan, so in a sense, you can finance the construction of a pond by securing the loan with the land that occupies the site of the pond.
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Instructions
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Hire a contractor to provide you with a quote for building your pond, including the cost of connecting the pond to the water supply and the cost of labor and materials. Consider getting two or three quotes from different builders in order to get the best deal. Compare the cost of the quote with your cash reserves in order to determine how much money you need to borrow in order to finance the construction.
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Contact several local banks and credit unions that you are eligible to join and find out which lenders offer home equity lines of credit with fixed rate options. Submit a loan application with one of the lenders that writes these loans. Provide the lender with the cost estimate of the pond, your warranty deed, your homeowner's insurance information, two years of tax returns, your most recent pay slip and 60 days of bank statements.
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Ask the lender to provide you with a line of credit that exceeds the proposed cost of the pond construction so that you have funds on hand in case costs exceed your expectations. Additionally, you need funds on hand to cover the cost of putting fish, plants or ornamentals into the constructed pond.
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Arrange a closing date for the loan. Sign the loan documents and use the equity line access checks or credit card to access the line as needed during the construction phase. After you complete the construction, instruct your lender to convert your variable rate line of credit to the fixed rate loan option so that rate increases do not cause your monthly payments to increase over the course of time.
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Tips & Warnings
If you lack equity in your home or have poor credit and thus cannot obtain a home equity line, you can take out a 401(k) loan and use the proceeds to finance the construction of your pond. You can borrow a 401(k) loan for up to $50,000 and repay the loan over the course of five years. Although you do pay interest on 401(k) loans, the interest and principal payments are applied to your own 401(k) account so you pay yourself interest. If you leave your job, you must immediately repay the loan or accept it as a taxable distribution.
The cost of installing a pond can vary depending on the size of the pond and the cost of materials, planning permits and labor in your area. You can consider financing a relatively low-cost pond with a credit card because when you do so, you do not stand to lose your home if you ever fall behind on your payments and default on the debt. However, credit cards typically have variable rates that can double or triple over time, and you may find yourself unable to pay off the debt.
References
- Bankrate.com; Financing a Remodeling Job; Salvatore Caputo and Leah Gliniewicz; April 2005
- Bankrate.com; Fixed Versus Variable Rate on a Personal Loan; Don Taylor; March 2003
- Bankrate.com; Four Good Reasons to Take Out a 401(k) Loan; Sonya Stinson
- Virginia Tech Cooperative Extension: Pond Construction: Some Practical Considerations
