Financing the DVC

[michvin]

I have a question that I am hoping someone would have some insight to.

We are seriously considering buying a DVC at SSR when we return in 3 weeks. We have 3 young children and plan on going to WDW at least once a year, so the DVC is our best option, plus it is really a pretty resort.

So, the financial question:

We will more than likely buy 200 to 250 points. We have the 10% in cash to put down. Were planning on financing through Disney , but will probably pay it off in under 5 years, so not too terribly concerned about the interest rate. However, we are hoping to be moving within the next 3 to 6 months..as the market has slowed to a dribble we aren't sure when. Does anyone know how much having disney put a credit inquiry on our report will matter when we go to get a new mortgage? We have excellent credit and our debt to income ratio is well below the "acceptable" limits. We just can't pay cash for the whole thing right not as the money is tied up. So, any insight is helpful.

I was also thinking I could just pay for the DVC on a credit card I already have or put it on the HELOC. Any thoughts? Its just having the show on the report...I don't know how much of a big deal it is if everything else is clean as a whistle. Thanks for any advice

 

[browniemtb]

We have excellent credit and our debt to income ratio is well below the "acceptable" limits.

Do you mean the your credit rating is above acceptable limits......great credit??

I believe Disney takes a look at your credit rating....they have to. But I do not believe that it stays on your credit report as does a mortgage. There are others on this forum that know all about this stuff. The only time Disney may hit you credit report is if you default on the loan.

With 10% down you will be looking at a interest rate of 11% to 12% for a 10 year note. There is no pre-payment penalty. Most who have gone this route, myself included, will pay the note off far before the 10 year period. Its a way to get your foot in the door if you don't have $15,000 or more laying around collecting dust.

Good luck in you venture

Brownie

 

[cgcruz]

well, remember, if you finance even if you pay off in 5 years at 10% interest you are paying 50% of the original price just in interest. That a lot, especially for 200-250 points. Add a couple hundred more for dues. BUT if you usually stay Every Year in a Deluxe hotel, you would still come in the upside in the long run.

 

[linzbear]

Disney doesn't report to credit agencies except in the case of a forclosure.

So the inquiry will be there, but that's it as long as you pay your bills.

 

[druidia]

For those who are interested in why, because I was, I asked our SSR guide last week.

I worked at a credit union years ago and simply could not understand how this loan would not show on your credit report. The guide said that it is because Disney is not a financial institution and they are basically loaning you their cash. He said that since they are not a financial institution, they are not obligated to report the borrowing to a credit agency.

Of course the loan defaults and credit inquiries do show up on your credit report.

Don't know how true the explantion is; just what we were told on our SSR tour.

I was also thinking I could just pay for the DVC on a credit card I already have or put it on the HELOC.

IMHO, putting it on a HELOC is a bad move if you are planning on moving soon. That means you just have to ask for that much more to pay off the equity loan when you sell. Maybe not a great idea in the current market where the buyer is becoming king again.

 

[Fitswimmer]

Related question: What about financing an add-on? I bought my original 210 points with cash, but have already developed addonitis. I'd like to add 50 more points-would it be financially stupid to finance that?

 

[browniemtb]

Related question: What about financing an add-on? I bought my original 210 points with cash, but have already developed addonitis. I'd like to add 50 more points-would it be financially stupid to finance that?

No, but you may want to consider using a Disney Visa and get points and free financing for a while.......If you have the card consider it...if you don't look into the details.....
Brownie

 

[RobDoc]

well, remember, if you finance even if you pay off in 5 years at 10% interest you are paying 50% of the original price just in interest. That a lot, especially for 200-250 points. Add a couple hundred more for dues. BUT if you usually stay Every Year in a Deluxe hotel, you would still come in the upside in the long run.

That's not correct. The interest rate is applied on the declining balance. Even the intitial amount financed is reduced by the amount of the downpayment.

Even if the payment is not made until the last day of the year- the interest expense would be 10% of the amount financed for only the first year - with monthly payments on the declining balance, the amount of interest paid even the first year will be less than 10% of the total.

Regardless, the finance charges do need to be included when figuring the most cost effective way to make the purchase.

 

[rinkwide]

Honeymoon Port Orleans - Riverside 1/95
10 years of no Disney Magic
1st family trip Wilderness Lodge 10/05...now we are addicted to it!
2nd family trip POFQ 1/06
Day at MGM 4/06
3rd trip All-Star Sports/ day at MK 8/06
Wilderness Lodge 10/06...can't wait!

Looking at your signature, I'd say buy a smaller resale (with available funds) at VWL and then pay cash for various stays at Mods or Values. You can always add points later as funds allow.

Unless you absolutely love that resort, financing a big SSR contract could really hurt your long-term value.

 

[mydogdrew]

That's not correct. The interest rate is applied on the declining balance. Even the intitial amount financed is reduced by the amount of the downpayment.

Even if the payment is not made until the last day of the year- the interest expense would be 10% of the amount financed for only the first year - with monthly payments on the declining balance, the amount of interest paid even the first year will be less than 10% of the total.

Regardless, the finance charges do need to be included when figuring the most cost effective way to make the purchase.

Finance charge would be 27.5% of the purchase price (10% amortized over five years). It's really had to argue in favor of financing a timeshare unless you are in a market of increasing prices. I would argue that those days are now behind us.

 

[Pluto 2]

your cost for a 5 year loan from dvc will cost

10 percent down 2,020
5 years at 349.78 times 60 months = 20986.80

20,986.80 plus 2,020= 23006.80

if you had the cash it will be 18,200

23,006.8 minus 18200 = 4806.80 in financed costs

where that one person said you will be spending 50 percent more because of the financed cost i dont know what he was thinking

i come out it will cost you 26.41 percent more

 

[michvin]

your cost for a 5 year loan from dvc will cost

10 percent down 2,020
5 years at 349.78 times 60 months = 20986.80

20,986.80 plus 2,020= 23006.80

if you had the cash it will be 18,200

23,006.8 minus 18200 = 4806.80 in financed costs

where that one person said you will be spending 50 percent more because of the financed cost i dont know what he was thinking

i come out it will cost you 26.41 percent more

I know its been a while since I've had exponential this that and the other but your numbers sound more on track! I figured that for us, with going one to two times a year with 3 young children, its all cheaper than staying at a deluxe suite room, which is where we were heading. The large regular deluxe rooms, like the Contemporary, or BC were just big rooms w/o any seperate space. And, why rent when you can "own". I'm trying to look past the "paying it off years" and see the total value over the next 15 years...those years we will have the kids at home. Thanks for the imput...we called our rep today to sign up for 270 points. 10% down, financing with them. With any luck, we'll have paid off in 4 years...at least that's the plan.

 

[castleri]

I know its been a while since I've had exponential this that and the other but your numbers sound more on track! I figured that for us, with going one to two times a year with 3 young children, its all cheaper than staying at a deluxe suite room, which is where we were heading. The large regular deluxe rooms, like the Contemporary, or BC were just big rooms w/o any seperate space. And, why rent when you can "own". I'm trying to look past the "paying it off years" and see the total value over the next 15 years...those years we will have the kids at home. Thanks for the imput...we called our rep today to sign up for 270 points. 10% down, financing with them. With any luck, we'll have paid off in 4 years...at least that's the plan.

Did you consider doing 150 points and then a 120 point add-on just in case you should find you need to cut expenses at some point but don't need to sell the entire 270 points. You would then be able to sell one or the other and smaller cotnracts seem to sell easier than large. Not trying to rain on you parade, just something you might want to consider. If you get 150 now and wait just a littler there may be some incentives that show up for adding on that extra 120 points as there have been in the past such as APs etc.
At any rate - Welcome Home and know that you will have many marvelous years to make wonderful memories with your family.

 

[JimMIA]

your cost for a 5 year loan from dvc will cost

10 percent down 2,020
5 years at 349.78 times 60 months = 20986.80

20,986.80 plus 2,020= 23006.80

if you had the cash it will be 18,200

23,006.8 minus 18200 = 4806.80 in financed costs

where that one person said you will be spending 50 percent more because of the financed cost i dont know what he was thinking

i come out it will cost you 26.41 percent more

I'm assuming this math is for 200 points @ $101 = $20,200. If so, I think there is an error in the final calculation.

If you paid cash, the total cost would be $20,200, not $18,200. Not sure where the -$2000 comes from in these calculations. Assuming the loan cost calculations are correct (I didn't check those, but they sound about right), then:

$23,006.80 - $20,200 = $2,806.80 in financed costs, which is about 13.9%.

 

[mydogdrew]

Seems to be confusion over the down payment here. Lets ignore that for a minute. $20,000 financed at 10% amortized over 60 months would be $425 per month. Total P&I at maturity would be $25,496. As I indicated above, interest amounts to 27.5% of purchase price in that case. If you decide to amortize over ten years and pay off after five, your interest would increase to $8300 (41.5% of purchase price).

 

[Jeremy&Susan]

I'm assuming this math is for 200 points @ $101 = $20,200. If so, I think there is an error in the final calculation.

If you paid cash, the total cost would be $20,200, not $18,200. Not sure where the -$2000 comes from in these calculations. Assuming the loan cost calculations are correct (I didn't check those, but they sound about right), then:

$23,006.80 - $20,200 = $2,806.80 in financed costs, which is about 13.9%.

Fun with Math and exponential interest bearing / costing.

If you paid $101 / point + $200 in closing your total costs for 200 points would be = $20,400.

If you pay 10% down ($2,040) you would finance $18360.

Financing terms assumed:
Monthly payments over 5 years at 10% interest rate.
Monthly payment would be $390.10 / month
Total payments over 5 years = $23,405.74 plus your 10% down = $25,445.74

Cost of financing would be $5,045.74 over your five year loan (total payments - amount financed).

As a percentage over your initial amount financed this would be 27.48% of the amount financed. While interesting, it does not mean you are paying 27.48% interest ( you are still paying 10% interest). What it does show is that instituions that make money by financing debt, MAKE MONEY. That is the American way of buying big ticket items. Either live with it or save your pennies and buy soemthing when you have cash (sounds communist to me).

If you have a mortgage at 5% interest with a $150K balance and you made big payments to pay it off in 5 years ($2831/ month), you would have paid $19,841 in interest over those five years or 13.23% of your initial debt at 5%.

Not sure where any of this is going other than it does cost money to borrow money and it costs more money to borrow money at higher interest rates.

 

[Pluto 2]

I'm assuming this math is for 200 points @ $101 = $20,200. If so, I think there is an error in the final calculation.

If you paid cash, the total cost would be $20,200, not $18,200. Not sure where the -$2000 comes from in these calculations. Assuming the loan cost calculations are correct (I didn't check those, but they sound about right), then:

$23,006.80 - $20,200 = $2,806.80 in financed costs, which is about 13.9%.

actually the cost is 91 dollars a point i figured on at 200 points.new members can get the 10 dollar credit if they forfeit their first year. current members get the 10 dollars off and the points for that year.

you still have to put down the 10 percent down on the 101 a point.

 

[michvin]

Did you consider doing 150 points and then a 120 point add-on just in case you should find you need to cut expenses at some point but don't need to sell the entire 270 points. You would then be able to sell one or the other and smaller cotnracts seem to sell easier than large. Not trying to rain on you parade, just something you might want to consider. If you get 150 now and wait just a littler there may be some incentives that show up for adding on that extra 120 points as there have been in the past such as APs etc.
At any rate - Welcome Home and know that you will have many marvelous years to make wonderful memories with your family.

just as you said. One for 120 and one for 150. Right now, with a new purchase, we can get either $10 off per point purchase, or an upfront one time extra value of points . So, we are getting and extra one time 270 points when we sign on. For us, its worth more than the AP's....

 

[drakethib]

No, but you may want to consider using a Disney Visa and get points and free financing for a while.......If you have the card consider it...if you don't look into the details.....
Brownie

Agree.


You could rack up some Disney Dollars this way.

 

[vascubaguy]

It's really had to argue in favor of financing a timeshare unless you are in a market of increasing prices. I would argue that those days are now behind us.

Odd, I could have sworn SSR prices have gone up twice in the last year...

I expect that the cost of points will continue to climb over the next few years (perhaps a little slower for the "older" DVCs)...