DVC Financing question

[disney0505]

If we finance our purchase through Disney, I know there is no prepayment penalty. So, lets say we finance $20,000 over 10 years and the monthly payment is $250. If we decide to pay off $10,000 of it after 2 years will the monthly adjust or the term shorten? Also, if you do sell a portion of your contract, who pays the closing costs typically?

 

[chalee94]

If we decide to pay off $10,000 of it after 2 years will the monthly adjust or the term shorten?

the term would shorten.

Also, if you do sell a portion of your contract, who pays the closing costs typically?

keep in mind, if you buy a 160 pt contract, you cannot sell off a portion of it...it is all or nothing.

if you buy 260 pts in the form of one 160 pt contract plus another 100 pt contract, then you can sell off either whole contract.

the buyer typically pays closing costs. the seller will typically pay a 10-12% commission to the agent. a lot depends on the market at the time you sell, though...

 

[disney0505]

With the financing, how does the interest/principal work? If i pay down $10K on the principal the term would shorten but am I still paying only interest like you would in a typical mortgage in the early years?

Thanks.

 

[chalee94]

With the financing, how does the interest/principal work? If i pay down $10K on the principal the term would shorten but am I still paying only interest like you would in a typical mortgage in the early years?

it's a lot like a typical mortgage.

as you pay down the principal, the interest charged each month declines and more of your monthly payment goes toward the principal.

if you pay off half the principal or so with a $10k payment, the interest portion will decline by roughly half - so again, more of your monthly payment is applied toward the principal...which results in paying it off more quickly.

 

[disney0505]

Do I benefit from paying down early or am I still paying the same amount of interest? If I finance $25K @ 10.75% over 10 years, the payment comes out to roughly $340.85. If you multiply that by 120 payments we will be paying roughly $16K in interest over the 10 years. So in year 2 I have some additional funds and send Disney a check for $10K. Will Disney apply this to my principal? Will this reduce my total interest paid over the new term? Sorry, I should know this but wanted to confirm.

Thanks for your help.

 

[bumbershoot]

You benefit.

They even have a nice little link in your Loan section to "pay the principal". That's going to lower the total interest you pay. People say it's high interest, but if you just don't want to wait to save the money and finance...it's a lovely little thing b/c they make it so easy to pay the principal. You can do it even as low as 10 bucks at a time.

Whereas with our car loan, to pay principal you either have to mail in your payment along with principal payment and make sure to check the box and hope they don't sit on the check until you're late. Or you go through the online system to pay on principal and pay an extra $10 for the pleasure of it. Or just send them extra money to a totally different address indicating it's for principal. Or just make your payment for more money, and then call to have the money allocated correctly (they will automatically just apply it to your next month's payment, which doesn't help AT ALL). Lots of options, none of them simple!

DVC makes it simple and easy.

 

[ssawka]

The one thing that is confusing is that when your payment is figured out, it is based on an amortization table, but that amortization table is based on you making the minimal payment. In laymens terms, they figure out how much interest and principal you would pay over the term (10 years) and divide it evenly to give you even payments.

In reality, your interest is figured out every month based on the current principal owed times the APR divided by twelve, so the equation is:

Interest = Principal * (APR/12)​