The concept of vacation ownership is based on the idea that owning a timeshare or real estate interest can be a more cost-effective option compared to paying for hotel rooms for yearly or frequent vacations. The notion is simple: why keep saving for hotel rooms when you can own your own piece of paradise? However, the reality of timeshare ownership often falls short of these expectations. Even deeded timeshares and fixed-week fractional interests come with numerous annual fees, such as maintenance fees, property taxes, HOA fees, and special assessments, which can pose a significant financial burden. Furthermore, the current trend of vacation clubs with point systems, exchange company fees, and complex reservation systems has only added to the complexity and costliness of timeshare ownership. Unfortunately, timeshare sales presentations often fail to disclose the full extent of these financial obligations, and buyers may only realize the actual costs when they receive their first bills. The purpose of this article is to provide readers with a clear understanding of the actual costs of owning a timeshare by outlining the various expenses involved, including the purchase price, mortgage, tax payments, and special assessments. In many cases, purchasing a timeshare may not be a prudent financial decision.
The Costs That Come With a Timeshare
It’s important for even seasoned buyers to understand that a timeshare may not be a wise investment once all the expenses are taken into account. Having a clear understanding of the costs associated with timeshare ownership is crucial to avoid falling victim to deceptive practices by timeshare companies. In this article, we will thoroughly explore the different expenses that come with owning a timeshare.
The Timeshare Purchase and Mortgage
When considering the purchase of a timeshare, the initial cost that often comes to mind is the payment made to the developer for the timeshare interest. The amount can vary depending on the type of timeshare, such as fixed- or floating-week deeded timeshare or a points-based vacation club offered by popular brands like Hilton Grand Vacations, Marriott, or Disney Vacation Club. Generally, the higher the purchase price, the higher the overall cost. According to the American Resort Development Association (ARDA), the average cost of a timeshare interval exceeds $24,000, with some timeshares priced well over $100,000.
For illustrative purposes, let’s assume a $30,000 purchase price with a $3,000 down payment, leaving a balance of $27,000 to be paid through a mortgage. However, unlike home loans, timeshare mortgages often come with high interest rates, sometimes reaching up to 20%. Assuming a standard interest rate of 15.9% for a ten-year mortgage, the total cost of the $30,000 timeshare will ultimately amount to $54,072.51 over a decade. This means you will end up paying nearly as much in interest ($27,072.51) as you will in principal over 120 payments. It’s important to note that this figure does not include any other associated fees that may be incurred.
Annual Timeshare Maintenance Fees
Based on a study conducted by the American Resort Development Association (ARDA) in 2019, maintenance fees for timeshares can range from $640 to nearly $1,300 per year, depending on the size of the unit. For the purpose of this example, let’s assume a maintenance fee of $1,000 per year for a seven-night timeshare usage. It’s important to note that maintenance fees are subject to inflation, just like other expenses. Assuming an annual inflation rate of 8.5%, the maintenance fee for our hypothetical scenario would amount to $17,096 over ten years and a staggering $53,489 over 20 years. It’s worth mentioning that maintenance fees can vary significantly by company, so the actual amount you’ll pay over time may differ. You can use the Maintenance Fee Inflation Calculator to estimate the inflation rate for your specific fees.
Timeshare Property Taxes, Homeowners Association (HOA) Fees, and Special Assessments
When you become a timeshare owner, you also become responsible for legal taxes, obligations, and regular payments. Failure to meet these payments could result in foreclosure. Property taxes for timeshares vary depending on the location and size of the unit. Assuming an annual property tax of $500, you would need to pay $5,000 over 10 years and $10,000 over 20 years. Another cost associated with timeshares is membership in the resort’s homeowner’s association (HOA), which covers the expenses for maintaining amenities and common areas. Typically, regular HOA fees amount to around $400 per year, resulting in a payment of $4,000 over 10 years and $8,000 over 20 years. However, regular HOA fees may not cover unforeseen expenses such as natural disasters or resort renovations. In such cases, the HOA may impose a special assessment fee, which can be unpredictable. Assuming a $500 special assessment fee every 10 years, you would need to pay a total of $1,000 over 20 years.
Fees for Using, Reserving, and Exchanging Your Timeshare
Owning a timeshare entails legal obligations, taxes, and various monthly and annual fees that must be paid in compliance with the law. Failure to meet these financial obligations may result in foreclosure of the timeshare property. Property taxes are determined based on the state and size of the timeshare interest, with an estimated annual amount of $500 in this example, totaling $5,000 over 10 years and $10,000 over 20 years. Additionally, a maintenance fee of approximately $400 per year is levied to cover the costs of resort upkeep, amounting to $4,000 over 10 years and $8,000 over 20 years. Special assessment fees may also be imposed, with an assumed fee of $500 every 10 years, totaling $1,000 over 20 years.
However, these expenses only cover ownership of the timeshare, and do not include usage fees. Many timeshare companies also impose hidden fees that may only become apparent later. For instance, to make a reservation, a fee of approximately $50 per stay is typically required, amounting to $500 over 10 years and $1,000 over 20 years. If you lend your timeshare to someone, a guest certificate may cost $100 each, resulting in $300 over 10 years and $600 over 20 years.
If you decide to join a timeshare exchange company like Interval International or RCI, an annual fee of around $65 is charged, totaling $650 over 10 years and an additional $1,300 over 20 years. Moreover, a reservation fee of approximately $270 is required to book a stay through an exchange company, resulting in $2,700 over 10 years and $5,400 over 20 years.
Furthermore, timeshare resorts may have additional fees for specific situations such as reselling or renting out the timeshare, and these fees can vary significantly, making them difficult to plan for. If you intend to use your timeshare to earn rental income, be prepared to pay extra for that opportunity.
So, What Is The Total Cost of a Timeshare?
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Considering all the expenses associated with owning a timeshare, it becomes evident that it can be a costly endeavor. It’s important to note that the estimates provided may not capture the full extent of the expenses. For instance, for a timeshare unit costing $30,000, the total cost over 10 years is estimated to be $84,818.51.
Assuming you are able to use the timeshare for seven nights every year, which may not always be the case, the cost per night would amount to $1,211.69. However, if you are unable to utilize all of your allotted nights, the cost per night would be even higher.
Over a 20-year period, the total cost of owning a timeshare would be $126,861.51, which is more than four times the original purchase price. Even if you are able to use all of your nights for 20 years, which is uncommon, the cost per night would still be $906.15. While this may be slightly less expensive than the 10-year scenario, it is still considerably more costly compared to staying at a luxury hotel or resort.
Tired of Paying Through the Nose? Centerstone Group Can Help
Many timeshare owners are seeking ways to terminate their contracts due to the expenses involved, as highlighted in the previous discussion. This is where Centerstone Group can offer assistance. As a reputable timeshare exit company, we are dedicated to providing our clients with legal and ethical solutions to exit their timeshare agreements. With our years of experience, we utilize techniques such as contract cancellation, unique pressure campaigns, or leveraging the expertise of our legal partners to find effective solutions for our clients.
If you are a timeshare owner looking to terminate your contract, we would be honored to assist you. Our company boasts an A+ rating with the Better Business Bureau (BBB), and we have numerous satisfied customers who can vouch for our exceptional services. Contact us today for a complimentary consultation and case review.