Effects of Defaulting on Resale Loan

[scrabblegirl]

I've rented points in the past, and now I'm thinking about buying some points of my own. I've watched a lot of the DVC Fan videos. One thing no one talks about is what happens if you can't pay your monthly payment due to unforeseen circumstances. I realize Monera is able to finance without a credit check because the points are great collateral. But is it like a land contract where you just walk away and lose the payments you've made so far? Do they keep the points and sue you for the remaining balance, adding a bunch of fees? I don't plan on defaulting but I'm kind of surprised this never comes up in the discussion. I assume it's written in the contract, but I'd like to know the real risk before getting to that point.

 

[CarolynFH]

I don't know what the Monera loan terms are - maybe their website will tell you. I do know that Florida is a "non-deficiency" state, at least when it comes to timeshare foreclosures for dues and/or unpaid loans from the timeshare developer. That means that if the borrower defaults and does not object to the foreclosure, the timeshare company can't do any more than take back the timeshare and can't sue the borrower for the balance of the debt. Again, I don't know whether the loan from Monera would fall under that law or not, since they aren't the developer and the loan finances a resale. This link from Timeshare Users Group (TUG) might be helpful: https://tugbbs.com/forums/threads/links-to-official-state-timeshare-laws-and-guides-manuals.298554/.

 

[sethschroeder]

I can't see that law applying to them because they are giving you a loan that just happens to have a timeshare as collateral likely.

I would ask them for their boilerplate and read it over and I would ask them as well what happens and get it in writing.

I always say though you shouldn't finance unless its "free money" that you already have the money for and will pay it off once its not "free" anymore.

Also remember with DVC its not just the room you have tickets, flights, rental car if you get it, food, ect that you are going to be buying as well. My suggestion would be to skip your next Disney trip, put all that money towards DVC, and you likely are much closer to the points you want. Do something local and less expensive.

 

[mz-s]

Seems like a fantastic question to ask Monera.

 

[Brian Noble]

They are not going to tell you "Oh, it's no big deal, we just let you walk away."

However, Florida has a process for "anti-deficiency" foreclosure; as long as you do not object to the process. (This assumes you are buying a Florida resort. If you are buying HHI or Aulani, the laws may be different.)
https://tugbbs.com/forums/threads/links-to-official-state-timeshare-laws-and-guides-manuals.298554/

You may (or may not) have a tax consequence if part of the loan is forgiven.
https://www.irs.gov/publications/p4681

It's also worth asking yourself how likely (or unlikely) it is that you will find yourself in this position. If you are asking the question, it means that the possibility exists. Maybe that's not a good time to buy?

 

[scrabblegirl]

My son moved out of state and was hit by a car while running, breaking his neck and his jaw. I had to close my business and use much of our emergency funds to stay down there for months until he got better. He did! We came home, I reopened my wedding business and started to get some momentum again when the pandemic started. We've been living on my husband's salary for years.

Since I'm going back to my former corporate overlords of 20+ years, (doubling our income) we wanted to go on a vacation next year, MVMCP 2024. I was going to rent points again, but I realized for the same price, I could be close to buying points myself. I thought it was reasonable to investigate for a year before buying. I don't even get enough vacation until then.

I'm asking the question because it's the responsible thing to do. The "possibility exists" for everyone, hence my question about unforeseen circumstances. I was just wondering if there was a trail of past clients who were losing their homes and/or having their wages garnished because there weren't stops in place to tell people they weren't ready.

I wanted to determine at what point I would have enough to buy. (20% down? 50% down? Pay in full?) In order to determine that, I need to know the risks. I suppose I could get a better rate from my credit union. I just want to know all my options. I hope others aren't discouraged from asking embarrassing but necessary questions.

 

[AstroBlasters]

My son moved out of state and was hit by a car while running, breaking his neck and his jaw. I had to close my business and use much of our emergency funds to stay down there for months until he got better. He did! We came home, I reopened my wedding business and started to get some momentum again when the pandemic started. We've been living on my husband's salary for years.

Since I'm going back to my former corporate overlords of 20+ years, (doubling our income) we wanted to go on a vacation next year, MVMCP 2024. I was going to rent points again, but I realized for the same price, I could be close to buying points myself. I thought it was reasonable to investigate for a year before buying. I don't even get enough vacation until then.

I'm asking the question because it's the responsible thing to do. The "possibility exists" for everyone, hence my question about unforeseen circumstances. I was just wondering if there was a trail of past clients who were losing their homes and/or having their wages garnished because there weren't stops in place to tell people they weren't ready.

I wanted to determine at what point I would have enough to buy. (20% down? 50% down? Pay in full?) In order to determine that, I need to know the risks. I suppose I could get a better rate from my credit union. I just want to know all my options. I hope others aren't discouraged from asking embarrassing but necessary questions.

Yikes! You have been on quite the journey. I’m glad that your son ended up being OK and that you have put yourself in a position to be taking Disney vacations again.

 

[lilsonicfan]

I don't think you should feel embarrassed or discouraged from asking questions.

Maybe the tough part is that Disney foreclosures on DVC seem somewhat clear - non-judicial foreclosure, apparently it happens at a law firm and not online any more (Not sure on that part) but defaulting on a loan that Monera holds, maybe is less common?

 

[Brian Noble]

That's why I prefaced my observation with "It's also worth asking yourself how likely (or unlikely) it is that you will find yourself in this position." There is a big difference between "I can't know it won't happen in the epistemological sense" and "This has a reasonable chance of happening."

Sounds like you are in the "Can't know it won't" camp.

 

[intamin]

I wanted to determine at what point I would have enough to buy. (20% down? 50% down? Pay in full?) In order to determine that, I need to know the risks. I suppose I could get a better rate from my credit union. I just want to know all my options. I hope others aren't discouraged from asking embarrassing but necessary questions.

The more down you can put would be better with paying in full being the best option but obviously we don't know what your full financial situation is. I would focus more on the time you think it'll take you to pay off the loan if you did get one. Play with the numbers on an amortization calculator and figure out what you're comfortable with. If you're not interested in renting, I would recommend picking up a smaller contract and then bank/borrow so you can go every 3 years or bank so you can go every 2 years. Obviously it being a smaller contract should allow you to pay it off faster and you're paying a lower amount on dues which means more money goes toward paying off the contract if it hasn't been already and the smaller contract will retain a higher price per point.

 

[karen4546]

My son moved out of state and was hit by a car while running, breaking his neck and his jaw. I had to close my business and use much of our emergency funds to stay down there for months until he got better. He did! We came home, I reopened my wedding business and started to get some momentum again when the pandemic started. We've been living on my husband's salary for years.

Since I'm going back to my former corporate overlords of 20+ years, (doubling our income) we wanted to go on a vacation next year, MVMCP 2024. I was going to rent points again, but I realized for the same price, I could be close to buying points myself. I thought it was reasonable to investigate for a year before buying. I don't even get enough vacation until then.

I'm asking the question because it's the responsible thing to do. The "possibility exists" for everyone, hence my question about unforeseen circumstances. I was just wondering if there was a trail of past clients who were losing their homes and/or having their wages garnished because there weren't stops in place to tell people they weren't ready.

I wanted to determine at what point I would have enough to buy. (20% down? 50% down? Pay in full?) In order to determine that, I need to know the risks. I suppose I could get a better rate from my credit union. I just want to know all my options. I hope others aren't discouraged from asking embarrassing but necessary questions.

We bought what we could pay for in cash-direct. We are currently saving for a cash resale purchase. I am ready to get what we can right now because prices are reasonable at this time and I don't want to lose out on the possible savings.
We definitely are going to match our UY and resort with our first resale purchase August AKV-100+100 contracts. WE have $10000 and only need a couple thousand more for the first 100pt resale @ AKV. Fingers crossed by Christmas this year.
Next, I hope to just match the UY at either BWV and or Copper Creek.

 

[sethschroeder]

My son moved out of state and was hit by a car while running, breaking his neck and his jaw. I had to close my business and use much of our emergency funds to stay down there for months until he got better. He did

Amazing I am so glad.

I will read the rest but wanted to say that.

I give my prayer to further safety if thats okay.

 

[linzjane88]

Honestly I don't think you're going to get a ton of responses from those that have been there because the general tone around here is "PAY CASH!!!!"so anything pointing to a scenario where someone didn't pay cash=bad.

But it's real life and most of us don't have a spare 20-40k cash just loitering around for a DVC purchase. Maybe I'm hanging in the wrong circles but if me or any of my friends/family were buy new /add more DVC there would probably be some financing involved. That could mean 2 months on direct points and spreading the payments or a few years with a low interest loan and anything in between.

I think it makes sense to ask the 'what if' question.

 

[AnnaKristoff2013]

Honestly I don't think you're going to get a ton of responses from those that have been there because the general tone around here is "PAY CASH!!!!"so anything pointing to a scenario where someone didn't pay cash=bad.

The reason why you should really only pay cash for DVC is that if you are not, the economics of owning the timeshare in general likely don’t work out. You’re better off just paying cash to rent rooms if you have to finance at double digit percentages to buy DVC. People are really bad at figuring out how much they’re going to end up paying in interest, and then just taking that number and seeing how much they would actually end up paying just to book rooms (that are usually discounted), or rent points.

 

[Sandisw]

The reason why you should really only pay cash for DVC is that if you are not, the economics of owning the timeshare in general likely don’t work out. You’re better off just paying cash to rent rooms if you have to finance at double digit percentages to buy DVC. People are really bad at figuring out how much they’re going to end up paying in interest, and then just taking that number and seeing how much they would actually end up paying just to book rooms (that are usually discounted), or rent points.

Not necessarily..but its not that simple…and, I don’t think it’s wrong to fiancé as long as one goes through all the aspects of it, can afford to use it which includes covering monthly payments and fees, and deciding how one would handle the loss of income.

We didn’t finance, but almost did….things changed that allowed us to buy for cash while we weee deciding…and we would not have regretted it one bit.

We spent a set amount of money every year for our room and when we were buying, we would get two more nights a year in a studio for that same amount, even with financing and fees…or get the same 5 nights we had been doing at the CR in a 1 bedroom.

We weren’t worried about how long until we saved, and liked what we could get for the product…it would have spread the costs out to get something we knew would love.

Absolutely, cash purchases changes the number...but financing DVC an open options for yearly trips that even paying for a hotel stay can’t.

 

[crisi]

The reason people are simplistic is that the "should I finance" answer is complicated and one that people who understand the complexities don't ask. They know when its a good idea to leverage and when it isn't, they can do the math, they have the knowledge they need. Its "if you have to ask, you likely don't understand the issues well enough to finance." And most people who ask about financing are asking because they don't understand. Which isn't necessarily the case here as the question is "what happens if I need to walk away from a Monera loan?"

 

[meleemouse]

Honestly I don't think you're going to get a ton of responses from those that have been there because the general tone around here is "PAY CASH!!!!"so anything pointing to a scenario where someone didn't pay cash=bad.

But it's real life and most of us don't have a spare 20-40k cash just loitering around for a DVC purchase. Maybe I'm hanging in the wrong circles but if me or any of my friends/family were buy new /add more DVC there would probably be some financing involved. That could mean 2 months on direct points and spreading the payments or a few years with a low interest loan and anything in between.

I think it makes sense to ask the 'what if' question.

It is always so bizarre to me that people seem to think you can't afford to have DVC unless you can pay cash for it. We are a family of two and have been spending $2k-4k on Disney trips (moderate resorts most of the time, with the occasional deluxe) each year since 2018 or so, and those resort prices have only been creeping up since. We made the decision to buy DVC - with financing - this year because in the long-run, it is going to cost less than or the same as what we were already spending, on average. We are on track to pay it off in under a year, and then we will have it for the next 40+ years. I only wish we had done it sooner.

 

[intamin]

Financing can definitely be right for certain people. Especially if you know otherwise you’d be paying cash rate for Disney anyways or you’re not interested in renting. But even so, financing can still make sense like for example if someone wanted to own VGF/RIV and wants to buy in before they’re no longer in active sales and the price likely jumps to 275+ per point when not in active sales. At that point I’d just chalk up the extra cost to paying for a resort I really want to own.

 

[mz-s]

It is always so bizarre to me that people seem to think you can't afford to have DVC unless you can pay cash for it. We are a family of two and have been spending $2k-4k on Disney trips (moderate resorts most of the time, with the occasional deluxe) each year since 2018 or so, and those resort prices have only been creeping up since. We made the decision to buy DVC - with financing - this year because in the long-run, it is going to cost less than or the same as what we were already spending, on average. We are on track to pay it off in under a year, and then we will have it for the next 40+ years. I only wish we had done it sooner.

Yes as long as you can pay it off extremely quickly, as in so quickly you should have just waited a few months and paid cash anyway, then it can still work out. But people who buy in with 10% down and a 10 year note (probably not even the 5 year note) will not come out ahead vs. paying cash.

I understand that it's not always about coming out ahead in life, but for a product like this that is entirely discretionary and the alternative (just booking the room on disneyworld.com when you want to travel) is so easy, I really can't see how paying a dime in interest is a good decision.

 

[Sandisw]

Yes as long as you can pay it off extremely quickly, as in so quickly you should have just waited a few months and paid cash anyway, then it can still work out. But people who buy in with 10% down and a 10 year note (probably not even the 5 year note) will not come out ahead vs. paying cash.

I understand that it's not always about coming out ahead in life, but for a product like this that is entirely discretionary and the alternative (just booking the room on disneyworld.com when you want to travel) is so easy, I really can't see how paying a dime in interest is a good decision.

They will..just will take a lot longer to get there. But, someone who can swing $300 a month to finance a DVC loan..may not be able to swing the cost if a 1 or 2 bedroom for that one trip thst year using banking or borrowing, etc.

So, again, there is no right or wrong answer because everyone values things differently. Fianancing adds to the cost..which will make the “break even” point different.

Not everyone is worried about those numbers to the same degree as others. Which is fine,,we all get to decide.

Of course, when someone asks for other’s opinions, they will get those opinions.

But is it not accurate thst anyone who doesn’t pay cash or can’t pay financing off quickly is making the wrong choice because in the end, it’s a personal decision.