Save up or finance? And how do you save up?

[bangzoom6877]

DH and I are looking into buying a resale at BWV next Spring. It is NOT a SURE thing right now, but a strong possibility. We are considering our payment options.

First thing we wanted to do was put it on our credit card. Very low interest rate (MUCH lower than a loan, and MUCH lower than the 9-10% I see advertised for financing DVC!). This credit card also earns points which go toward the principal on our mortgage, which is another reason we considered it. Now, we already put away A LOT toward retirement (we are teachers so we have a terrific retirement plan that we take full advantage of), kids' college tuition continuously every month since they were born (they are 3 and 1), and we are paying off a 0% credit card (not too slowly either). With all of that and our mortgage, utilities, food, car lease payments (which should go down next time we lease since we are downsizing), insurance, gas, DS3's school...we still have a very nice amount leftover every month. Now, we have about 9 months or so to save as much as we can. DH gets steady overtime hours at work because fortunately for us, the high school where he works has a longer day than our union contract day, and so teachers who work the longer day (which is about 90% of them, and they allow any teacher to work the longer day, just that they can't FORCE them to based on our contract) make $5,000 or more per year over their normal annual salary, after taxes. So my suggestion was to take that money and put it away in a separate account every month, and have that as a down payment (we never figure this money into our monthly budget, as the number of hours varies each schoolyear because some days at his school are non-extended days, such as days before a school break...so we always consider this money extra, just in case). I also thought about our tax return next year. We got a very considerable amount back this year, and I am certain we will at least get back something next year. We always file right away, in February, so we get our refund before April rolls around (actually long before April usually). So by the end of April, we should have a considerable amount to put down in cash.

If you saved up to pay in full (or close to it, or even half) for your DVC membership, how did you do it?

What would you do if you were me? We were also thinking of putting this on our equity line, but not sure about that. Interest on that right now is 6%...not bad. Also, with resale you cannot use a credit card, only directly through Disney. Need advice!

 

[kim_d]

We financed through Disney both times. We didn't finance the full 10 years, put more than 10% down and plan to plan to pay both off early. The payments are managable and it seems to work for us.

 

[bangzoom6877]

We financed through Disney both times. We didn't finance the full 10 years, put more than 10% down and plan to plan to pay both off early. The payments are managable and it seems to work for us.

Oh, we would definitely put more than 10% down, that's for sure. I would like to ideally put down at least half though. So on a $13,000 resale, I would like to have $6,500 to put down initially. Seems possible for us. $1,300 would be 10%, I am sure we could AT LEAST double that, or hopefully, like I said, put down half. This is sounding very good, and very manageable for us.

 

[Coach81]

We financed for ours, I am paying more than the note per month, and hope to have it paid off in the not-too-distant future!

We decided to finance and enjoy the membership instead of saving and waiting, we have enjoyed three trips so far, and are hopefully headed back again two more times next year!

 

[popgfd]

If you were to buy contracts at smaller points ---100 points for example--- you may be able to purchase one contract given your comments next Spring for app $8K. Then you could purchase another 100 point contract with the same use year in another 12 to 18 months. Resale per point is also higher with smaller point contracts.

DW and I have seven contracts between BWV and OKW and financed the first one primarily because we didn't know some of the purchasing options like the Timesshare Store.

Good Luck

Pop

 

[JimMIA]

The conventional wisdom here on the DIS is that DVC is a luxury purchase and if you have to finance it, you should not buy. But like most conventional wisdom, it doesn't really match every situation.

Personally, I think only you know your family's financial situation well enough to make a rational judgement. I feel much more comfortable when I see the depth that you are researching. You are obviously not the type of prospective buyer who tries every "fuzzy math" trick in the books to make the numbers look like you can afford the payments.

Financing certainly adds to the cost, and it's risky (IMO) for anyone who doesn't have a super-secure job in this economy.

But that's not your situation either. You both have secure jobs with good fringe benefits, and that is very important when you assess your family's overall financial position. In fact, from what you have posted, it looks like you are in much better financial shape than most young families.

I think it also helps that you don't need to (and shouldn't) make a decision right away. You have 9 months, and that grace period will give you plenty of time to see more clearly how the future looks and you'll have a much better grasp of how the savings plan is working.

One financing suggestion I would make is to look into the possibility of using a home equity loan or line of credit to finance. That will usually give you a lower interest rate than even Disney financing, because the loan is secured by your home.

Good luck with your decision!

 

[bangzoom6877]

The conventional wisdom here on the DIS is that DVC is a luxury purchase and if you have to finance it, you should not buy. But like most conventional wisdom, it doesn't really match every situation.

Personally, I think only you know your family's financial situation well enough to make a rational judgement. I feel much more comfortable when I see the depth that you are researching. You are obviously not the type of prospective buyer who tries every "fuzzy math" trick in the books to make the numbers look like you can afford the payments.

Financing certainly adds to the cost, and it's risky (IMO) for anyone who doesn't have a super-secure job in this economy.

But that's not your situation either. You both have secure jobs with good fringe benefits, and that is very important when you assess your family's overall financial position. In fact, from what you have posted, it looks like you are in much better financial shape than most young families.
I think it also helps that you don't need to (and shouldn't) make a decision right away. You have 9 months, and that grace period will give you plenty of time to see more clearly how the future looks and you'll have a much better grasp of how the savings plan is working.

One financing suggestion I would make is to look into the possibility of using a home equity loan or line of credit to finance. That will usually give you a lower interest rate than even Disney financing, because the loan is secured by your home.

Good luck with your decision!

We have a home equity line of credit and have talked about using that to finance the purchase. If we do have to finance it, or any part of it, that is the way we are going to go. We also talk about the possibility of re-financing to a 20-yr. mortgage some time in the future so that is paid off faster, if we could get a lower interest rate than what we are paying on our current 30-yr. mortgage which still has 27 years left on it.

Thank you for the comment that we seem to be in better financial shape than most young families. DH and I always talk about that. We are so lucky that we have secure jobs in today's economy. DH is also a massage therapist on the side. He started teaching at age 22, then after a couple of years he did not want to teach anymore (he taught junior high school, can't blame him for not liking that!). He became a massage therapist, after talking extensively to my cousin who is also a massage therpist. He worked at a spa on 5th Avenue in Manhattan, but had to work Wed through Sun, so we were not off the same days unless it was a school break and I was off that Monday and Tuesday, which were his days off. After we had our first son, he was not liking this because he was looking ahead to later in DS's childhood on all he would miss out on, like Little League Games and other weekend activities. We spoke about it and I suggested teaching Health on the high school level (he previously taught English in the middle school). He found out that he only needed a few credits to get the license, because they accepted so many of his credits from massage school, which was at a state-accredited college. So, 2 years ago he began teaching Health in a high school and he absolutely loves it. He still does massage on the side, and even though the economy is terrible right now he still gets some clients. He also went to the YMHA yesterday and they might give him a gig there, and he is involved with one person who gets him sporadic gigs as well. So he makes some extra through that too, which we have not even considered as helping us pay for DVC but that is mainly because that money is never guaranteed.

Needless to say, DH is thrilled that he got out of the spa industry when he did, given today's economy. Massage is seen as a luxury by most people, and today there is probably not much money to be made in the spa industry for a massage therapist. Teaching is much more secure, he has his weekends off with me and the kids, and he is much happier and a lot less exhausted physically when he comes home!

 

[JimMIA]

If you were to buy contracts at smaller points ---100 points for example--- you may be able to purchase one contract given your comments next Spring for app $8K. Then you could purchase another 100 point contract with the same use year in another 12 to 18 months. Resale per point is also higher with smaller point contracts.

This is also a very sound strategy, and it has a couple of advantages over buying a larger contract and financing. [TTS has reduced closing costs for small contracts; I don't know if other brokers have the same advantage.]

First of all, obviously, there is no debt.

Secondly, there are only two times when you'll notice the difference.

The first year, you'll have fewer points and might have to scale a vacation back a bit. But your kids are young, and a few days now won't make a big difference. You have a very good grip on the long-term nature of this, and this shouldn't be a problem.

Also, if you buy resale and get a contract with banked points, you may have plenty of points even during that first year.

The other time you'll notice the difference is when you sell. Smaller contracts are much easier to sell -- not everyone wants to buy a 300 point contract. And they also command higher prices -- which hurts you a bit going in, but helps you getting out.

 

[Coach81]

Wife is a ultrasonographer of 12 years, and I am a high school teacher/coach of 17 years. Finances are far from what I would call great, but stable nonetheless

 

[Laxmom]

GMAC will take a credit card but there are limits and it will delay closing for about a week as they have to get the money put into their account and then get it to the closing company.

We decided to go resale and buy small contracts. We purchased our first 50 pts contract just to get into the system. We paid cash after saving for a year. That was enough points for us to go every other year in a studio to begin with. We then added on another 50 pts. directly thru Disney. We also paid cash for that one. I put it on the credit card to get the points and then paid it off before interest hit. We paid for that one with a trailer that we sold - traded one vacation experience for another. We will probably add on more points when we can save up some more. I just put any extra and found money into our savings until I am comfortable parting with some of it.

 

[bangzoom6877]

GMAC will take a credit card but there are limits and it will delay closing for about a week as they have to get the money put into their account and then get it to the closing company.

We decided to go resale and buy small contracts. We purchased our first 50 pts contract just to get into the system. We paid cash after saving for a year. That was enough points for us to go every other year in a studio to begin with. We then added on another 50 pts. directly thru Disney. We also paid cash for that one. I put it on the credit card to get the points and then paid it off before interest hit. We paid for that one with a trailer that we sold - traded one vacation experience for another. We will probably add on more points when we can save up some more. I just put any extra and found money into our savings until I am comfortable parting with some of it.

Anyone have experience purchasing through GMAC? Anyone in particular you would recommend dealing with? I am going to look into this and maybe contact them. A concern is also if they can advise us on not risking ROFR with Disney, meaning, what would be an offer DIsney would most likely allow to go through. Timeshare Store and Jaki Apetz both advise people of this.

 

[Karenj2]

DH and I have been talking extensively about this - I want to jump in right now, and he's being the voice of reason.

What we've decided to do is to wait a year - but during that year we're going to put money away. My car will be fully paid for as of .... Thursday!! so we're going to put that money into an ING account. (I'm going to see if we can go one step further and put one of my paychecks a month into the account, too!)

That way when we DO finally go for it (hopefully) we'll have a big chunk already paid for, and won't have to finance as much.

 

[Laxmom]

I used GMAC with no problems. Rachel or Carolyn specialize in DVC. Alot of people bash GMAC but I have seen complaints against all the resellers with the exception of Jackie and ****. They were very helpful with us on our contract as to if they thought it would pass. There is also a thread here on the Dis that will help. I will post back with a link.

Buying resale does require patients; it takes about 6-8 weeks.

ETA; http://www.disboards.com/showthread.php?t=1710667&page=113

 

[Karenj2]

dumb question -what's GMAC?

 

[hakepb]

GMAC = I believe General Motors Acceptance Corporation, the financial wing of the GM car company. I've seen ads for their realtor agency, and they aparantly also resell timeshares (which are real-estate interests)

GMAC really hurt GM in this quarter. GMAC second mortages took a huge hit (Billion$) and the lower than expected resale value of leases of trucks and SUV's also took a huge hit.

 

[Laxmom]

GMAC International Properties is a DVC resale agent.

 

[Anthony1971]

If you do save enough money or are comfortable with what you have in savings......
I would suggest a HELOC with good credit you can get them for 4.5% for a lower amount--100,000 or lower rates for a hgher amount 250,000--you only use the amount you need but some do not like to have that much credit and it is easy to find one with no costs to open it and sometimes a free gift. Take the money you would have paid the full amount with and put it in an online savings account-- Country wide bank --yes it is FDIC insured and safe-- is paying 3.55%. You can make money considering the tax benifit of the HELOC and better you have access to savings if you need it.
This works now but be aware the a HELOC is variable with Prime rate so if prime goes up so does the rate you are paying but then again you have the money in savings to pay it off.

 

[bangzoom6877]

If you do save enough money or are comfortable with what you have in savings......
I would suggest a HELOC with good credit you can get them for 4.5% for a lower amount--100,000 or lower rates for a hgher amount 250,000--you only use the amount you need but some do not like to have that much credit and it is easy to find one with no costs to open it and sometimes a free gift. Take the money you would have paid the full amount with and put it in an online savings account-- Country wide bank --yes it is FDIC insured and safe-- is paying 3.55%. You can make money considering the tax benifit of the HELOC and better you have access to savings if you need it.
This works now but be aware the a HELOC is variable with Prime rate so if prime goes up so does the rate you are paying but then again you have the money in savings to pay it off.

Thank you, I am familiar with this already as we have a HELOC already and we have considered using this to buy DVC (for the extra we cannot put down up front by next Spring, hopefully it will only be half though!).

 

[Anthony1971]

Thank you, I am familiar with this already as we have a HELOC already and we have considered using this to buy DVC (for the extra we cannot put down up front by next Spring, hopefully it will only be half though!).

In the case you do not have enough in savings to cover the full amount I would not suggest using a HELOC as you are putting your house at risk for a luxury item.
If you have half DVC offers a 12 month loan that has a fairly low rate which can turn out to be safer although a little more costly.
Although paying more may sound foolish if things were to get tight and the extra few hundred a month could really make a diffrence you are better of losing your DVC.

 

[Lisa F]

We bought in in 2000 and financed for 10 years and are about to finish paying it off. I know it goes against "conventional DIS wisdom" but we looked at what were spending for two weeks in a deluxe hotel (at the time $169/night AP rate for BWI/BC/YC or equivalent). We figured at the time that we'd be doing that vacation anyway so might as well have something to show for it at at the end. Vacations are important to us and we make it a priority.

Now 8 years later we will own 300 BWV points free and clear. We were paying $2600/year to finance them. If we continued to stay in our deluxe hotel rooms we would be paying $1200 more per year than we were 8 years ago for the same discounted rate. Of course our dues have gone up but not as much. Now our yearly outlay is a fraction of what it was before.

IMO if you're going to spend the money ANYWAY on vacations - particularly deluxe hotels (even discounted) paying interest is the lesser of two evils between throwing the money at a hotel or buying into DVC and financing. Sort of like buying a house instead of renting - even if you don't have the cash to buy it outright, at least you have something at the end of your mortgage period, whereas if you were renting you would not. Buying a house is not always the right choice vs. renting and neither is financing DVC but for us it was.