Financing the purchase of DVC?

[d1sneyf4n]

Quick question, if you buy resale can you finance the purchase price or do you have to have the cash in hand? TIA

 

[disneynutz]

You can finance but it takes away from DVC being a great deal. You need to look at the total cost to see if DVC is less expensive than renting a reservation from an owner or getting a discount from Disney on a cash reservation.

Bill

 

[d1sneyf4n]

You can finance but it takes away from DVC being a great deal. You need to look at the total cost to see if DVC is less expensive than renting a reservation from an owner or getting a discount from Disney on a cash reservation.

Bill

Thanks, I hear what you are saying.

 

[cfw213]

You can finance with Timeshare Lending. Like the PP said, it does take away some of the value, but not all of it.

We financed 160 points at SSR, resale using Fidelity & Timeshare Lending = 12.9% int with 20% down...total cost is $13,076.

Through Disney 160 points @ $110 a point = $17,600.

Still significant savings, but if you can pay cash it's obviously the better option.

 

[d1sneyf4n]

You can finance with Timeshare Lending. Like the PP said, it does take away some of the value, but not all of it.

We financed 160 points at SSR, resale using Fidelity & Timeshare Lending = 12.9% int with 20% down...total cost is $13,076.

Through Disney 160 points @ $110 a point = $17,600.

Still significant savings, but if you can pay cash it's obviously the better option.

Thanks for the breakdown. Not to to bad when you look at it like that.

 

[ELMC]

You can finance with Timeshare Lending. Like the PP said, it does take away some of the value, but not all of it.

We financed 160 points at SSR, resale using Fidelity & Timeshare Lending = 12.9% int with 20% down...total cost is $13,076.

Through Disney 160 points @ $110 a point = $17,600.

Still significant savings, but if you can pay cash it's obviously the better option.

The value would still be there if you compare resale to direct. But if you finance your purchase there is a good chance that it would erase most if not all of the value vs. other options such as cash reservations with a discount or renting points from an existing owner.

 

[bom_noite]

I am a bit conservative when it comes to money. And, these are simply my opinions......

I was lucky / unlucky that our DVC purchase was funded via a very small inheritance after my fathers passing. My wife said - it is your money and your ultimate decision on how to use it. We paid for our 1st 150 pt contract and the first 3 years of dues with my inheritance.

I personally believe you should not finance a Vacation Property of any type. The DVC Resale market is very active due to folks who bought in - the economy burps and now they can no longer afford the commitment.

I was astounded when I saw people quoting Interest Rates of 13 to 19%! That is almost as high as most credit cards. Interest rates are based on risk. I would imagine your loan is secured - if you default they get your membership (and a tangible asset).

Compare that to a credit card (ranging from 15% to 21%) on a 100% un-secured loan (aka: You keep your DVC even if you default!). It simply should tell you one thing: A ton of people are defaulting on the loans being written. If nobody defaulted, then, the interest rate would be 3 to 5%.

You can either afford this beast - or - you can't.

Now, if you have good credit, a long healthy relationship with your bank I think you can pay much less then 13%.

Walk in to your branch and talk to the Manager or a Personal Banker. You need to walk in with good documentation on the DVC Program, how the resale rates have held their own (and many posts are out here which demonstrate that). More importantly, have good documentation on your credit history, your jobs and why you think you will pay the loan off in xx months or sooner.

If you take this route: Large banks are more willing to take risk, but, have set loan products and are less willing to deviate from this product list. Smaller banks are less willing to take on risk, but, are usually more apt to structure personal loans if it makes good business sense. And, they always love it if you will transfer checking / savings accounts / CD's and other products to their institution.

Also, good healthy down-payments will help the banker see this is a good deal (as their risk is minimized). -

Look, I have rambled too long - my point is this:

1) If you have a good credit history and stable income - better options can be found at less then 13%.
2) If your only option is paying 13% or higher, then, I question the wisdom in financing a DVC purchase.

My extremely humble opinion.

 

[bom_noite]

Let me also add I am not a curmudgeon. If you can afford the DVC purchase - and you know you can: Please bypass all of the silly spreadsheets and posts dealing with a detailed cost justification (with Dues, Interest, Taxes, Wind-Speed and Lunar Magnetic Shifts factored in).

Here is my justification: I bought 150 BCV points in 2003. Traded that (via a sell and buy) 2 years ago for 190 pts at OKW. My purchase price was $12,500. I assume I have spent $8000 in dues. My total cost: $20,500.

In the last 3 years I have had 15 days in a OKW Grand Villa which has a daily "Rack Rate" of $1400+ per night: Total cost out of pocket would have been $21000.

So, over the last 3 years I am $500 to the good. That does not factor in the 5 or 6 other years of vacations since we got our membership. I also know I could unload tomorrow and get a check for $10K to $12K (60 to 120 days later).

You also need to factor in the countless relatives and family friends that we have been able to treat with a WDW Vacation - at a fraction of the cost.

A pretty easy justification if you love WDW as a vacation destination and you know you will covet it every year for the foreseeable future.

 

[AJA]

I was going to suggest talking with a bank to see the interest rates on a personal loan. As someone else stated I believe the best interest rate from resale brokers is around 13% (that's a little much imo).

A poster in another thread had a good idea for those that may not have cash in hand at the moment, still want to buy asap (maybe because of the costs of an upcoming trip they would be making anyway and want to use points for the stay rather than paying cash AND paying out for DVC soon afterwards) and do have the means to pay the balance off in a relatively short amount of time. If you have a credit card that offers the "low interest check to yourself" option where you can write yourself a personal check, pay a small fee and only pay 2-3% interest. -all in all you may spend a few hundred bucks on fees/interest but it beats 13%!

 

[d1sneyf4n]

Thanks for all the replies. It is a tough decision weather to buy in or not. We are a family of 5 and I would love to be able to get to DW 2 times a year. I am not sure if it would be cheaper in the long run to buy in or just really hope and keep our fingers crossed that we get those 40% off pin codes they send out (even though we have not seen one in 2 years).

 

[ELMC]

Thanks for all the replies. It is a tough decision weather to buy in or not. We are a family of 5 and I would love to be able to get to DW 2 times a year. I am not sure if it would be cheaper in the long run to buy in or just really hope and keep our fingers crossed that we get those 40% off pin codes they send out (even though we have not seen one in 2 years).

You have a lot of numbers to run. How do you typically vacation? If you stay in mods (that sleep 5 in one room), odds are you won't save any money by purchasing DVC. If you typically stay in Deluxes, you most likely will (just keep in mind that finance charges will erode a lot of the long term savings).

In another thread, Doug laid out a pretty good plan for "self financing" a DVC purchase. Basically, figure out what your monthly payment would be and pay that to yourself until you have saved up enough money to buy a small contract. In the meantime, rent the points that you need in order to stay at DVC. It's essentially the same thing as buying now and financing, except you are paying yourself the interest and you have more flexibility.

Typically I would only recommend financing if you have another use for the money that can earn you a better return than what you are paying in finance charges. So if you have a municipal bond fund that returns 7%, you might be better off using your HELOC at 3% to finance your DVC purchase. This is just a general example, for advice specific to your situation you should consult your tax professional.

Good luck with your decision.

 

[gsthome]

If you're thinking of financing, don't limit yourself to just financing through the Realtor. I bought in April 2011 and financed through my credit union. I was able to get a personal line of credit with a variable rate of 5.15%. I plan on having it paid off by Oct 2013 and will only have paid an extra $850 in interest. Since the contract I was buying was pretty loaded, I thought the extra expense was reasonable.

 

[ELMC]

If you're thinking of financing, don't limit yourself to just financing through the Realtor. I bought in April 2011 and financed through my credit union. I was able to get a personal line of credit with a variable rate of 5.15%. I plan on having it paid off by Oct 2013 and will only have paid an extra $850 in interest. Since the contract I was buying was pretty loaded, I thought the extra expense was reasonable.

This is another good example of using financing as a tool to accomplish an objective. Given the fact that loaded contracts are hard to come by, this purchase could very well have been a wash between finance charges paid and benefits gained. Financing DVC is not the devil, but rather the devil is in the details.

People need to be aware of the fact that if you finance a direct purchase over 10 years at the 13.99% interest rate, it effectively doubles your purchase price. I find it so interesting that people would think it ridiculous to pay $320 pp for BLT, but they would buy direct for $160pp, finance the purchase and take the full 10 years to pay it off. It's basically the same thing.

 

[DizBub]

If you're thinking of financing, don't limit yourself to just financing through the Realtor. I bought in April 2011 and financed through my credit union. I was able to get a personal line of credit with a variable rate of 5.15%. I plan on having it paid off by Oct 2013 and will only have paid an extra $850 in interest. Since the contract I was buying was pretty loaded, I thought the extra expense was reasonable.

We also did this. Our interest rate started out at 4.24% but have refinanced twice and it's now 2.24%. It's a great deal if you can get it.