Every year, (well, except 2020), tens of millions of Americans travel the country to escape the repetitive reality of their everyday lives. During these vacations, many become intrigued by timeshare opportunities that appear to offer annual trips at discounted rates. While the pitch doesn’t appeal to everyone, it does develop a desire in some tourists to sign up for a repeat vacation every year. Those that take out a timeshare mortgage often think it’s similar to owning a home. But it’s not exactly an on-demand type of travel option.
No matter how much your vacation blinds you from reality, a timeshare mortgage is nothing like homeownership. As our country approaches a potential travel surge on the tail end of COVID-19, consumers must understand that timeshare companies are thirsty for sales. Since March, they’ve been tightly gripping their billions of dollars while slowly squeezing the sponge of their operations. When tourism reopens, they’ll most certainly be looking to target euphoric travelers that are, once again, enjoying an escape.
Helping Consumers Make Good Decisions.
Now that we’ve covered most of the lies that timeshares use to persuade and lure, we thought it’d be a good idea to help consumers better understand the basics of vacation ownership. Believe it or not, we actually care about helping people before they call us to get rid of the timeshare contract. There are plenty of viable travel options out there and buying a timeshare is never a good idea when the decision is based on misinformation.
When you’re unsure of what a $20K timeshare mortgage entails, then you really ought to take the time to find out. Trusting a salesman in this industry is extremely risky. It’s why we prefer to educate the general public on timeshares instead of cramming cancellation services down the throat of owners. Those that eventually want to get out typically remember our warnings.
In today’s marketplace, sales teams rarely even mention the term “timeshare” anymore. Distinct product titles such as, “vacation club” and “fractional vacation ownership” are intentionally used to avoid any type of negative connotation. Sellers are constantly evolving sales pitches to further deceive. Although timeshare termination is our specialty, equipping consumers with truth, guidance and encouragement is the best thing we can do.
How Is a Timeshare Mortgage Similar to a Home Loan?
While it may appear that you’ve struck gold with an “affordable” second home in a popular vacation destination, don’t count your chickens before they hatch. A timeshare mortgage almost always is not, by any means, cheap – and buying one as if it’s a vacation home will leave you with egg on your face. But before explaining the stark differences, it’s a good idea to go over how salespeople convince consumers that a timeshare mortgage and homeownership are one in the same.
If you already own a residential property then some of the terminology used in the purchase will sound familiar. Both transactions may include a deed and promissory note with consistent obligations that are expected to be met by the buyer. Looming penalties (such as foreclosure, bankruptcy, negative credit reporting, etc.) should be expected for both when contractual requirements are not honored.
Owners of home or timeshare mortgages are almost always required to cover the costs of maintenance and repairs. While homeownership offers much more control (as we’ll cover shortly), both can become quite costly if some sort of disaster were to occur. Each mortgage comes with its own set of risks, but the reward of one may be nonexistent when you take a closer look at it.
Differentiating Timeshare Mortgages & Homeownership.
At the end of the day, the biggest distinction between a house and a timeshare is the simple fact you don’t live in a weekly interval. Whether you “own” a floating unit or purchased points, you’re simply paying for time – that may or may not even be available during your desired dates. You see, the timeshare sale oftentimes is about luring buyers into the next best option when things don’t work out as planned.
A timeshare mortgage will more than likely not provide you with the luxurious vacation home of your dreams that you can visit whenever you want without any booking issues. Every visit, you may not be able to pick back up where you left off from last year. You truly do not own the property. So as we go down this list of differences, try to see the product for what it is: A purchase agreement which almost always has annual mandated fees, availability issues, unexpected liabilities and minimal decision making opportunities.
1. Owners of a Timeshare Mortgage Can’t Make Decisions.
When you own a home, unexpected expenses can be burdensome. But your ability to make decisions regarding the situation helps you manage the overall cost accordingly. Regular maintenance and upkeep can also be controlled and homeowners are essentially able to sleep in the beds they make for themselves. If you have the money and want to add a pool or enhance the landscape then you can. But a timeshare mortgage is nothing like homeownership.
Timeshare companies don’t exactly make decisions with the approval of their vacation owners. In fact, they almost never even ask for input. If they want to remodel a pool or add another wing to a resort then they do so. When a natural disaster strikes or a pandemic slows their ability to drive revenue – special assessments, in addition to timeshare maintenance fees, help resorts fund repairs. If your timeshare company is bought out or acquired by another entity, it would not be uncommon for maintenance or special assessment fees to skyrocket.
Once you’re under contract, you may become liable to share in some of the timeshare’s expenses along with the other fractional owners. Sadly, many buyers never realize how much annual costs can be and are rarely prepared to pay. Unlike homeownership, where you might be able to use some bandaids until money is right, timeshares almost always have deadlines for fees. Resorts rarely take back mortgages and like we mentioned before, missed payments can carry similar penalties.
2. Vacation Owners Have No Say in Visitation.
When you think about it, owning a timeshare is kind of like living in a dorm room. Every year, a new set of freshmen move in with a new set of freedoms and little accountability. Although some believe a timeshare mortgage will provide them with a little slice of paradise, what about all of the other guests that enjoy your proudly owned unit during the remaining 51 weeks of the year? Unlike your house, you have no control over who comes and goes.
As a matter of fact, you can’t even decorate the premises or make it your own because another guest, you don’t know, will arrive shortly. A timeshare presentation may cause you to believe something is going to be yours but you’re really paying tens of thousands for nothing more than a glorified hotel room. With this in mind, is it really worth paying upwards of $40K in a timeshare mortgage, annual fees, taxes and interest for frequently used lodging? It might be if you think you’ll be able to lower the overall cost.
3. Refinancing a Timeshare Mortgage is proving to be a Pipe Dream.
Nearly every consumer preparing to sign a timeshare mortgage with an interest rate of 13% – 17.9% (may be higher where permitted) has questions and concerns. One of the most cunning ways timeshare sales teams persuade them to sign up for unfavorable agreements anyways is by lying to them about their refinancing options. It may sound good, but almost no bank will refinance a timeshare agreement because they carry little to no value on the secondary market, therefore there is no collateral to back the loan.
In the past, when owners were unable (or refused) to repay a timeshare mortgage, it would cause banks a tremendous amount of unnecessary problems. Because of this, many timeshare operations talk people into placing the purchase on an high interest credit card (normally a partner) until they’re able to “work out a lower interest rate with the bank.”
Once targets are under agreement, the timeshare sales rep knows it will prove to be difficult to get out of the obligation without repercussions. By the time a new owner realizes they can’t refinance through their bank (or another financial institution), the rescission (cancellation) period has usually run its course. No matter how much conflict this creates, the timeshare is easily able to point to the contract while claiming the buyer’s remorse is legally not their fault or problem.
SMALL DIFFERENCES MAKE A BIG DIFFERENCE.
Rates for home loans aren’t anywhere near the rates of most timeshare mortgages. Strict lending processes eliminate a lot of risk and help banks understand who they’re loaning money to. Buyers that make payments on time are often rewarded with refinance and accelerated repayment options.
A mortgage with a timeshare company almost never holds any value on the resale market and the interest will more than likely remain high for the extent of the loan – unless you pay it off quickly, which many do. But even after the timeshare mortgage is paid in full, most owners are still obligated to cover the costs of maintenance and assessment costs for the life of their contract, oftentimes in perpetuity. This alone takes the wind out of the sails of many.
4. No Equitable Position With a Timeshare Mortgage.
Vacation ownership is nearly impossible to sell due to the lack of demand on the secondary market. Even sales teams have to aggressively pitch the product to unsuspecting buyers while almost always refusing to take “No” for an answer. At the end of the day, owners can’t even invest into the property themselves to increase its value. As a homeowner, you can always upgrade the property and make minor changes to add to its appeal and increase resale value. With a timeshare, you may find that you can’t even give it away (or donate it to a good cause) if you wanted to.
You may find that pouring these funds into better maintaining your own house, adding to it’s worth, is more ideal than obligating yourself to a timeshare mortgage. Even more, why not use the money to pay off the home loan? Once it’s yours, it actually becomes an asset. You can never truly own a timeshare and leverage it as an asset. It’s nothing more than a liability – easily making a timeshare mortgage nothing like homeownership.
If you want a vacation home, you may want to look into financing a small investment property or condo that you can rent and use at your leisure. This at least can place you in an equitable position. Although a timeshare vacation may seem like an amazing opportunity for the entire family, investing in something that can be yours, together, can be so much more fulfilling. Especially when you’re in control of expenses, upgrades, refinancing, guests and the future of the property.