If you’re in the market for a vacation, a timeshare may seem like a great idea. After all, they offer access to exclusive vacation spots at a fraction of the cost of renting a hotel room, and they often come with annual maintenance fees that fall well below what you’d pay to stay in a comparable hotel during the same period. Plus, you can rent out any unused days to help offset costs. But, before you sign on the dotted line, make sure you know what you’re getting into.
Failing to understand the total costs is one of the top financial mistakes people make, says Ric Edelman, founder of Edelman Financial Engines. Just like you might overlook a car’s fuel economy or safety features, many people purchase timeshares without fully researching them. And, as a result, they end up regretting the decision.
Timeshares are not as cheap as they’re made out to be, and they can become onerous when owners can no longer travel. For example, if you own a timeshare at a popular vacation destination but don’t have the time to use it, you can often sell your unit on the resale market for far less than what you paid for it. But, if you’ve already gone past your contract’s cooling-off period, you’re legally bound to pay for the timeshare unless you hire an exit company, which can run up to $15,000, according to Fidelity Real Estate Investment Services.
To avoid this expensive mistake, do your research before you buy, and be sure to consider all the options available to you. If you’re looking to finance a timeshare, be sure to compare the rates and terms of different lenders. A personal loan or home equity line of credit from an online lender such as Figure could be an alternative to a timeshare mortgage, and it may offer better terms and lower interest rates.
One savvy perk to look for when buying a timeshare is day access privileges, which allow you to enjoy the resort’s amenities even if you’re not staying in your own unit. For example, one family bought a timeshare at a beachfront resort that was 20 minutes from their home, and they frequently visited the pool, private beach clubhouse, and gym. They didn’t spend any time in their actual suite, but still saved money because they weren’t paying for hotel room charges.
If you decide to keep your timeshare, try to book your reservations as early as possible to secure the dates and accommodations you want. Moreover, you should book your stay during non-peak seasons, as prices will be cheaper. Additionally, you can always opt for a studio or one-bedroom unit rather than a larger apartment or villa.
If you’re planning to sell your timeshare, you’ll likely find that it will not recoup what you paid for it on the secondary market. Developers add in extra expenses such as presentation fees, so when you go to sell your timeshare, don’t expect it to be worth much more than the price you paid for it.