financing

[PutnamDS]

I paid similar closing costs. I think someone wrote that there are no closing costs for add-ons. There were certainly closing costs for the first points we just bought though Disney.

 

[PEANUT1]

if you borrow from your 401k...the interest that you pay goes back into your account? is this correct.? If so....it seems that it is not a bad idea. We want to buy more points when Kingdom Tower's starts selling. I may consider doing this.

 

[Chellymouse]

We financed through Disney for right now, but we are planning to pay it off in the next 2 years. We put 10% on a 10 yr (we needed lower monthly payments for right now) and bought in at 225 points (to take advantage of incentives). our interest rate is horrible at 10.75%. If you are able to look at a home equity, you may be better off to do it that way as you will be able to get a tax deduction from your home equity at the end of the year for interest paid. You may also have a smaller interest rate, but again, it depends on where you want your monthly payment. The only reason we financed through Disney is that we didn't want to extend our home equity line out and we know that once I finish my Master's it will be paid off in a short period of time. We figured it out and if we took 10 years to pay it off we would be paying $12000 in interest to Disney. You definitely need to look at both long and short term before you decide what's best for your family's budget.
In short....look at your interest rates, where you need your payment to be every month and how long you expect to pay it off. Good luck!

 

[delmar411]

I paid similar closing costs. I think someone wrote that there are no closing costs for add-ons. There were certainly closing costs for the first points we just bought though Disney.

there are closing costs, you aren't paying them though. DVC pays them if you buy direct.

 

[Y-ASK]

if you borrow from your 401k...the interest that you pay goes back into your account? is this correct.? If so....it seems that it is not a bad idea. We want to buy more points when Kingdom Tower's starts selling. I may consider doing this.

It depends on your plan through your company but yes, in every case that I've seen, you are borrowing from yourself and paying yourself back, including the interest. The problems occur if you lose your job and can't pay that loan back. Then the Govt. and 401K treat it as a premature withdrawal and you get heavily taxed and pentalized. On average you lose about 50% of those funds and since you've already "spent" the money on DVC you would be looking at quite a tax payment due on April 15th. It's a risk but if you know your situation and are comfortable with it the risk is minimal.

Y-ASK

 

[rstackjd]

I'd call your guide. Do you have your paperwork handy? The mortgage closing statement should show you where your funds went to. Mine show where Disney is paying the closing costs.

ok, dug mine out...you'll look on the page that says Settlement statement. There will be a seller's column and and borrower's column. Our settlement costs are listed there in the seller's column.

I'll have to pull mine out tonight, but in the mean time I called my guide. AS he explained it, in the past DVC covered the closing costs. With rising closing costs, starting at SSR DVC required the first time buyers to pay toward the closing costs. Currently that amount is $320. After the first purchase then there are no closing costs for future add-ons through DVC.

So apparently everyone is right - if yo've owned for more than a few years, you didn't have to pay any, but those of us who were late to the party have to contribute to the costs when first joining.

Once again, day late and a dollar short. Oh well, at least we're in now!

 

[delmar411]

I'll have to pull mine out tonight, but in the mean time I called my guide. AS he explained it, in the past DVC covered the closing costs. With rising closing costs, starting at SSR DVC required the first time buyers to pay toward the closing costs. Currently that amount is $320. After the first purchase then there are no closing costs for future add-ons through DVC.

So apparently everyone is right - if yo've owned for more than a few years, you didn't have to pay any, but those of us who were late to the party have to contribute to the costs when first joining.

Once again, day late and a dollar short. Oh well, at least we're in now!

Well maybe it's because we bought in at OKW then? But I closed on the 11th (this week) w/o paying closing costs.

 

[vicki_c]

We also paid closing costs for our SSR purchase in February. This was very specifically identified to us in advance by our guide and shown on our HUD settlement statement - it was about the same as OPs said - $300 something.

But we also got the developer's points, and the discounted purchase price - I think they add the discount amount to your downpayment amount - honestly, I can't even remember and it was only a month ago!

 

[stopher1]

if you borrow from your 401k...the interest that you pay goes back into your account? is this correct.? If so....it seems that it is not a bad idea. We want to buy more points when Kingdom Tower's starts selling. I may consider doing this.

The interest you pay yourself when you take a loan against your 401k (or 403b in some instances), DOES go back into your account - BUT, and there is always a BUT... when you invest in your account initially, the amount from your payroll that goes into the account is PRE-tax; when you take a loan against your balance, and then the payments start, the payments come out of your pay AFTER-tax. So you are benefiting yourself, but you are also reducing the long-term benefit of the overall account balance. These situations do work out well, but like most any financial arrangement - don't jump without reading EVERYTHING. Your employer or account servicer should be able to give all kinds of details about the pros and cons. It IS a good option, however, when compared to the 10.95 or 14.95 rates charged by Disney.

Also - another poster said something about NO closing costs for financed purchases... not so according to my guide. She told us closing costs would be $200 for a cash purchase, or $320 for a financed purchase (regardless of whether we financed through Disney or brought our own financing to the table).

 

[Y-ASK]

So you are benefiting yourself, but you are also reducing the long-term benefit of the overall account balance.

I was with you up until this one point. Please help me to understand what long-term benefit is actually being reduced out of the overall account balance?

Your point about pre-taxed and after-taxed is right on. But you are not suppose to think about it like you are investing in your 401K so pre-taxed or after-taxed doesn't really matter. You are taking out a loan, note, whatever you want to call it and you are paying your "after-tax" payment back on that loan, just like you would if you used a credit card, home equity loan, or unsecured loan. The beauity of it is that you're paying yourself back. The interest you gain in your 401K account is lost if you use one of the other methods to secure your loan.

The only way I could see losing is if #1 you default or #2 your portfolio earns better than the interest rate you are collecting on your loan. In my case that would be 8%. As far as #2, have you looked at your 401K and compared where you were last year at this time and where you are today? You might be shocked to find out that if you had taken out a loan to yourself last year, that investment might be the only postive investment you made all year...

Y-ASK

 

[stopher1]

I was with you up until this one point. Please help me to understand what long-term benefit is actually being reduced out of the overall account balance?


Y-ASK

I was simply referring to the overall value of compounding, and the difference between pre and after tax payments. You make excellent counter-points which I don't dispute. I was just responding to help illuminate the need to examine every financial transaction carefully. Certainly if an individual's account value is pretty large the impact will mostly likely not be as bad as it would be if an individual's account were smaller (I'm talking the difference say between $100K+ vs $25K+ or thereabouts - but these are just examples). Everyone's situation is unique, and getting expert advice is key. I personally do have a loan against my retirement account, and you are right, I made out better on that loan than any other investments we've got - at least in the last few months.

 

[Y-ASK]

I was just responding to help illuminate the need to examine every financial transaction carefully.

This is so true! You need to look at all the ramifications (if any) that could happen and make a judgement call based on how well you know yourself. Most 401K plans are only going to allow you borrow up to 50% of what you have in your account and some plans will move the other 50% into safer investments that might not net you the gains you would have expected. I'm fortunate enough to have the flexablitiy to borrow and keep my investment choices the same as before I borrowed. Everyone's situation is different so make sure you understand everything that is going to happen if you borrow and of course what may happen if you're forced to default.

Y-ASK