- The concept of vacation ownership has long been based on the idea that owning a timeshare or real estate interest can be financially beneficial for those who take frequent vacations. The notion is that instead of saving for hotel rooms every year, you can own your own piece of paradise.
- However, in reality, the timeshare industry has not often operated in this way. Even deeded timeshares and fixed-week fractional interests come with additional costs such as annual maintenance fees, property taxes, HOA fees, and special assessments, making timeshare ownership more of a financial burden.
- The modern trend of vacation clubs with point systems, exchange company fees, and complex reservation systems has made the process even more complicated and costly. Often, the true cost of a timeshare is not fully explained during the sales presentation, and the actual expenses may only become apparent when the first set of bills arrives.
- This article aims to provide an understanding of the true cost of a timeshare by breaking down the various expenses involved, including the purchase price, mortgage payments, tax payments, and special assessments. It is important to recognize that in many cases, buying a timeshare may not be a wise decision for personal finances.
The Costs That Come With a Timeshare
- Even experienced and savvy buyers may be surprised when they carefully calculate and realize that a timeshare may not be the great deal it initially seemed. As always, knowledge is key in protecting oneself from potential exploitation by timeshare companies.
- Now, let’s examine all the various costs that are associated with owning a timeshare.
The Timeshare Purchase and Mortgage
- When it comes to the cost of a timeshare, most people typically think of the upfront payment made to the developer for the timeshare interest. This amount can vary depending on the type of timeshare, such as a fixed- or floating-week deeded timeshare, or a points-based vacation club like Hilton Grand Vacations Max, Marriott, or Disney Vacation Club.
- In either case, the price tag increases as you buy more, whether it’s a deeded real estate or points that allow you to use a wider variety of timeshare resorts at different times. According to the American Resort Development Association (ARDA), the average cost of a timeshare interval is over $24,000, with some timeshares costing over $100,000.
- For the purpose of our hypothetical scenario, let’s assume a round purchase price of $30,000, with a $3,000 down payment. This means you would need a $27,000 mortgage to cover the remaining amount.
- However, unlike a home loan, timeshare mortgage interest rates can be quite high, reaching up to 20% in some cases. For this scenario, let’s assume a slightly lower but still common rate of 15.9% for 10 years.
- To calculate the total cost, you need to add the principal ($27,000) to the mortgage interest you would pay over 10 years. Based on these terms, your $30,000 timeshare would actually cost you $54,072.51 over 10 years, which means you would pay almost as much in interest ($27,072.51) as in principal over 120 payments!
- If this number surprises you, keep in mind that we haven’t even discussed any of the other fees associated with timeshares yet.
Annual Timeshare Maintenance Fees
Based on research conducted by ARDA in 2019, annual maintenance fees for timeshares can range from as low as $640 for a small studio unit to nearly $1,300 for a three-bedroom unit. For the purpose of our hypothetical scenario, let’s assume an annual maintenance fee of $1,000 for seven nights of timeshare usage per year.
It’s important to note that these fees are not static and are subject to inflation, much like many other expenses in today’s world. For our hypothetical scenario, let’s assume an inflation rate of 8.5% per year for maintenance fees. This means that over a span of 10 years, you would end up spending $17,096 in maintenance fees alone. In 20 years, this amount would balloon to a staggering $53,489!
It’s worth mentioning that maintenance fees can vary significantly from one timeshare company to another. To calculate the inflation of your specific fees, you can use Centerstone Group’s Maintenance Fee Calculator, which takes into account the current inflation rate in the U.S.
Timeshare Property Taxes, Homeowners Association (HOA) Fees, and Special Assessments
Timeshare ownership entails not only the initial purchase cost but also ongoing financial obligations such as legal taxes, monthly and annual fees, which are mandated by law. Failure to fulfill these obligations could result in your timeshare being subject to foreclosure.
Property taxes for your timeshare will vary depending on the state where it is located and the size of your interest. For our hypothetical scenario, let’s assume an annual property tax of $500, resulting in $5,000 in total paid over 10 years, and $10,000 over 20 years.
Another expense associated with timeshare ownership is the membership fee for the resort’s homeowner’s association (HOA). The HOA is responsible for maintaining roads, amenities, and common areas within the resort. On average, you can expect to pay around $400 per year in regular HOA fees, totaling $4,000 over 10 years, and $8,000 over 20 years.
However, there may be unforeseen costs such as special assessments for resort repairs or renovations that are not covered by regular HOA dues. The amount of these special assessments can be difficult to predict. For our hypothetical scenario, let’s assume a total of $500 in special assessments every 10 years, resulting in $1,000 in total over 20 years.
Fees for Using, Reserving, and Exchanging Your Timeshare
However, your financial obligations as a timeshare owner do not end with the initial costs. There are often numerous hidden fees charged by timeshare companies that you may not be aware of until it’s too late.
For instance, when you want to book a stay at your vacation home, you will likely need to make a reservation and pay a reservation fee, which is usually around $50 per stay. If you make one five-night stay per year, that would amount to $500 after 10 years and $1,000 after 20 years.
If you do not use your timeshare every year and instead lend it to a friend, you may also incur additional costs. Guest certificates typically cost $100 each. If you lend out your timeshare three times per decade, you would have paid $300 after 10 years and $600 after 20 years.
In some cases, you may join or be required to join a timeshare exchange company like Interval International or RCI to have more flexibility in using your timeshare. These services usually come with an annual fee of around $65. Over 10 years, this would amount to $650, and over 20 years, it would be an additional $1,300.
It’s important not to overlook reservation fees when booking a stay using an exchange company. For a seven-day stay, you could expect to pay around $270 as a reservation fee. If you do this every year for 10 years, you would be paying $2,700 in fees, and over 20 years, it would be an extra $5,400.
Lastly, timeshare resorts often have various fees for specific situations, although they may be hard to anticipate. For example, if you want to list your timeshare on the resale market or use it for rental purposes, you may be required to pay commissions to realtors. Essentially, if you intend to use your timeshare to generate income, be prepared to pay additional fees for that opportunity.
So, What Is The Total Cost of a Timeshare?
Now that we have accounted for all these expenses, we can calculate the total cost, keeping in mind that some of the estimates are conservative. For a timeshare unit priced at $30,000, the total cost over 10 years would amount to $84,818.51.
Let’s consider a scenario where you have seven nights available at your timeshare per year, and you use every single one of those nights annually, which is highly unlikely. In this case, you would be spending $1,211.69 per night for your timeshare unit. And if you do not use all your nights, your average price per night would only increase.
Over 20 years, the total cost would amount to $126,861.51, which is more than four times the original “purchase price” of the timeshare unit. Assuming you use every single one of your nights for 20 years, which is extremely rare, you would be spending $906.15 per night. While this may seem like a slightly better deal compared to 10 years, it is still significantly more expensive than staying in a nice hotel or resort.
Tired of Paying Through the Nose? Centerstone Group Can Help
When confronted with numbers like these, it’s understandable why many timeshare owners are seeking a way out of their contracts. This is where Centerstone Group comes in. As a leading timeshare exit company, we specialize in helping clients achieve legal and ethical timeshare exits. Through contract cancellation, our proprietary pressure campaigns, or assistance from our legal partners, we have years of experience in finding effective exit solutions.
If you’re a timeshare owner looking to put an end to the financial drain, we would be honored to assist you. We are proud of our A+ rating with the Better Business Bureau (BBB), and have numerous reviews from satisfied customers. Contact us today for a complimentary consultation and case evaluation.