Opinions on financing

[bhiggs7]

I've been doing a ton of research on DVC - my wife is either going to divorce me or have to invest in some ear plugs. I probably should just stop talking to her about it and ask the dogs opinion on SSR vs. OKW or UY or resale vs. direct or . . . . you get the picture.

Anyway, I was reading on mousesavers about DVC. This article mentions that DVC is a much better decision when it doesn't need to be financed - no kidding! So is not financing my house, car, hot tub, about half of my furniture, furnace, my new flat screen tv (very nice), and my second child. No, wait a minute, my second child wasn't financed - I paid cash for him. Seriously though, over the years we financed many things and we have a great credit score, little debt, and are looking to enjoy our lives with our children. So my question is - do most people finance or pay cash? Should I be rethinking this or should I chalk this one up to another luxury purchase that would benefit my family?

Opinions are appreciated - just don't let my wife know I'm talking about this again!

 

[Havana]

We paid cash, and bought the amount of points we could afford.
At the moment it is 100 points, but we plan to save more to pay cash for another 50 points in the next year.

 

[mouseaider]

We were in your same shoes..... minus the baby. We've been wanting to join for four years now and we finally made an offer on a 100 point resale that is ROFR right now.

For me personally...... I would NEVER finance DVC. Maybe it would be right for you.... but not me.

Good luck with your decision.

 

[jlewisinsyr]

In the grand scheme of things, whether you finance or pay cash the largest portion, by a long shot is not the initial buy in; it is the dues/maintenance fees.

There are some members who are adamantly against financing a "luxury" purchase, others who don't care. Ultimately, if you're financial able to pay for it (that includes having a financial cushion) it shouldn't matter.

We could have paid cash, but we choose not to, we didn't want to drain our accounts to purchase it. Sure I'm paying more for it, but I'm also not paying for annual stays on a cash basis, those funds have been redirected to the DVC loan.

 

[extremesoccermom]

We follow Dave Ramsey and have not bought anything on credit since June 05. Although Dave would say a timeshare is NOT a good investment we decided it was a good deal to us. We bought our first 50 pt. SSR contract resale and immediately added 25 pt at AKV paying cash for both. We were happy with this until BLT. We had to have 100 pts and get a free cruise . We broke down and financed it through Disney for 1 year but we paid it off early.
I now want to add on another 100-150 points but we decided once again the best way for us is to buy resale after I have spent a year saving the money it makes me love it all the more.

 

[Pirate4Ever]

If you finance, just be sure to pay it off as soon as possible, paying more an your set monthly payment. For us, we didn't have $10,000 lying around, but when we sat down and figured out our monthly payment and how much on top od that we could do- financing turned out to be not so bad. It's not like your home mortgage- you won't end up pay 3-4 times your contract in interest. Good luck convincing you wife!

 

[JimMIA]

I saw some numbers a year or so ago that said that about 75% of all direct DVC sales were financed. I don't have any data on resales, but I'd think few resales are financed, although there is financing available. If you need to finance and you have a home equity line available, that will usually be your best rate.

Should you finance? Who knows? You'll get some opinions, but truthfully none of us know your finances, job stability, etc. That's a personal financial decision and I don't think any of us can really give you sound advice there.

 

[katybug34]

If I am not mistaken, you can write the interest on the loan off if you don't have a second home that you are already deducting since you actually are paying on a piece of deeded real estate. Correct me if I am wrong.

 

[rentayenta]

If you are comfortable with the monthly payment and fees then finance away. Only you know your credit hx and patterns.

 

[jodifla]

I've been doing a ton of research on DVC - my wife is either going to divorce me or have to invest in some ear plugs. I probably should just stop talking to her about it and ask the dogs opinion on SSR vs. OKW or UY or resale vs. direct or . . . . you get the picture.

Anyway, I was reading on mousesavers about DVC. This article mentions that DVC is a much better decision when it doesn't need to be financed - no kidding! So is not financing my house, car, hot tub, about half of my furniture, furnace, my new flat screen tv (very nice), and my second child. No, wait a minute, my second child wasn't financed - I paid cash for him. Seriously though, over the years we financed many things and we have a great credit score, little debt, and are looking to enjoy our lives with our children. So my question is - do most people finance or pay cash? Should I be rethinking this or should I chalk this one up to another luxury purchase that would benefit my family?

Opinions are appreciated - just don't let my wife know I'm talking about this again!

We think like you. We normally besides our house have one thing financed. If not, life turns into the scene in "Up" -- you never buy your dream purchases, because some emergency always comes up.

We were ALREADY spending lodging money at WDW, so we just diverted that money into buying DVC.

And because we did it 14 years ago, we paid far less than people are paying now, paid it off in a few years, and have had all those great WDW vacations. I'm SO glad we didn't wait and then buy later....we would have thrown a lot of money away.

 

[saintstickets]

As PP said, we follow Dave Ramsey and have not financed anything for many years. It is such a great feeling to not have a car note, no credit card balances and pay for everything up front without financing. If any of you can ever make it to that point, I cannot explain the feeling...it has to be experienced to appreciate it.

With that said and stepping off my soap box now rotfl2, we bought into DVC with a small 50 point contract by paying cash. A short while later we bought another 50 point contract. We visited WDW in May, 2010 (trip report link below) on those points and are going back after Thanksgiving this year. By purchasing through resale, we paid less than direct from Disney and also had banked points that we are using. We are already planning our trip for Dec, 2011! If all goes well, we will purchase another small contract sometime next year on cash.

My point is this...instead of financing a larger contract, think about starting small without financing and then add on as you can afford it. With banking and borrowing of your points, you can really do a lot even with a small contract and it will be paid for!!

 

[palaemon]

Obviously, it's better to pay cash. No one disagrees with that. However, paying cash can be more stressful. If I paid 12-15k out of savings, I'd be freaking out. It's like saying, "Pay cash for your car."

If I was buying. 50 point contract, then cash is more doable.

I agree, DVC is not a necessity, but I wouldn't exactly call it a luxury either.

Are all vacations a luxury? We need to get away for a week. Away from the hustle bustle.

I did a spreadsheet and basically, if you paid $12000. +10.9% interest over 10 years + MF (increasing 3% per year - all based on OKW-extended)

It worked out at an avg of $2000 a year for the next 40+ years.

Okay - I know it's rediculous, but it was kind of fun. Also, MF are a major variable.

But my point is that it's not so expensive that I'd automatically call it a luxury.

Also, I know that there are other expenses: flight, car rental (for some), tickets, food, souvenirs, etc.)

That doesn't take into account "Addon-itis" either.

 

[bumbershoot]

If you finance, just be sure to pay it off as soon as possible, paying more an your set monthly payment. For us, we didn't have $10,000 lying around, but when we sat down and figured out our monthly payment and how much on top od that we could do- financing turned out to be not so bad. It's not like your home mortgage- you won't end up pay 3-4 times your contract in interest. Good luck convincing you wife!

Definitely pay it off early if you go the financing route. They make it so easy, there's even a handy button on the loan section of the website!

If you don't mind waiting, you could always save up, keeping the interest to yourself. A bit of a delay, but then you get to plunk down the cash, and I'm sure there's a happy feeling that goes along with that.

We bought *just* before finally hearing what Dave Ramsey had to say...since DVC isn't an "investment" for us but rather a different way to have vacations (that we were still taking and were going to continue to take b/c travel is the thing that keeps me and DH going and a shared love for Disney was realized in '07) we kept it...not sure if I'd make the decision again, but it's what we did.

 

[hbehrman]

I've been doing a ton of research on DVC - my wife is either going to divorce me or have to invest in some ear plugs. I probably should just stop talking to her about it and ask the dogs opinion on SSR vs. OKW or UY or resale vs. direct or . . . . you get the picture.

Anyway, I was reading on mousesavers about DVC. This article mentions that DVC is a much better decision when it doesn't need to be financed - no kidding! So is not financing my house, car, hot tub, about half of my furniture, furnace, my new flat screen tv (very nice), and my second child. No, wait a minute, my second child wasn't financed - I paid cash for him. Seriously though, over the years we financed many things and we have a great credit score, little debt, and are looking to enjoy our lives with our children. So my question is - do most people finance or pay cash? Should I be rethinking this or should I chalk this one up to another luxury purchase that would benefit my family?

Opinions are appreciated - just don't let my wife know I'm talking about this again!

IMHO My 3 step plan about financing:
1) If you are liquid (you have the cash, personally unless your net worth is sky high you shouldn't have this much cash lying around except for a 100pt or less contract ) pay cash;
2) If you are not liquid and you have the money in investments making interest over the rate of the loan then finance it, under the rate then sell investments (except IRA/retirement/401k) and pay cash;
3) If you are neither and can afford the monthly expense (and annual dues) you have no other option to finance: choose equity line (fixed or credit line),then any financing less than the DVC rate, with DVC rate being the highest rate you would consider. Commit to paying it down early within a reasonable budget.

Other opinions may exist, but I tend to follow the above.

 

[FoxberryJam]

We went the HELOC route, the rate just made it a no-brainer. The plan was to pay it off in 4 to 5 yrs, still on track to do so.

 

[ShuisFan584]

I bought my first 200 point contract before I got married and owned a house. So I had the money upfront and didn't need to finance. I don't think I would have bought at that time if I didn't have the money to pay up front. I prefer not to finance anything, although we don't really have a choice when it comes to the house!

 

[ToddyLu]

DH and I financed....life is to short and we would have never been able to stay at AKL otherwise and pay cash at those prices. We are already going to Disney once a year with no let up in sight. Neither one of us do a sport, boat or have an expensive hobby....so we decided DVC would be my hobby, and DH enjoys me enjoying the pleaseure of ownership.

I wanted to be able to stay at a world class resort--finally in my 40's, and enjoy my hard earned money that way. Doesn't make me less lovable on the DIS, just one of the few who admits WE FINANCED IT ALL!!

 

[palaemon]

DH and I financed....life is to short and we would have never been able to stay at AKL otherwise and pay cash at those prices. We are already going to Disney once a year with no let up in sight. Neither one of us do a sport, boat or have an expensive hobby....so we decided DVC would be my hobby, and DH enjoys me enjoying the pleaseure of ownership.

I wanted to be able to stay at a world class resort--finally in my 40's, and enjoy my hard earned money that way. Doesn't make me less lovable on the DIS, just one of the few who admits WE FINANCED IT ALL!!

Thank YOU!

 

[CarolMN]

Somethings to consider:

If you finance and have to sell within 5 - 7 years, you are going to lose a lot of money. You may not even be able to get enough money from a sale to pay off the financing. Selling takes time. It's not quick money.

A good portion of the resale contracts are on the market because they were purchased on impulse and financed. I suspect many people decided they could afford the monthly payments and then suffered some type of financial setback. In this economy, it a sure bet that people didn't plan to lose their jobs and for many of them it was unexpected.

You may get a good rate on a Home Equity Loan, but you are essentially putting your home at risk to purchase a luxury. Disney vacations are a luxury. Competent financial advisers will tell you that luxuries should come from discretionary income.

DVC covers only lodging. You still need to pay for transportation, food, tickets and souvenirs.

In the end, what you do with your money is your business. Decisions have consequences, good and bad. You get the results with the action.

Good luck!

 

[CarolMN]

If you haven't already, take a look at this thread - even though the thread starter can afford the payments, it sounds like she wishes they hadn't financed:

possibly selling.....need advice