whats owed Disney

[k3chantal]

I would like to agree that leveraging debt can be very beneficial. I think the general negative opinion of financing DVC refers to people who choose to finance the payments for the full ten years at the 11% or even 14% interest rate. And even then, it doesn't make them a bad person, but it can lead to so many problems that we have seen on here time after time.

You were able to articulate what I was trying to say better than I was. Thank you.

 

[crisi]

Leveraging debt is tricky though. It's one thing to have assets tied up and leveraging debt to cover you over a short time (we did that when we bought DVC, we had a bonus check on the way and committed, but it was thirty days out from arriving when we closed, a home equity loan covered us short term so we didn't need to liquidate stock)...it's another to be betting on future income. The first leveraging debt, the second a bad idea. It'd one thing to decide that the assets you have are returning more than the interest rate on the debt (I have a mortgage for that reason), another to use debt to prepay vacations you can't afford to pay for in assets today. Again, the first is leveraging the debt, the second is justifying taking out a loan for a luxury purchase.

 

[Missyrose]

I can honestly see how financing a resale contract in the short term can work (as long as you have a plan for payoff so the interest doesn't eat away at all your savings).

But the problem comes with financing a direct purchase. Most (not all) direct buyers probably have no plan to pay off their purchase in a reasonable time (because the cost is so high), but it also leaves them without an escape plan if they find they need to sell DVC.

I put in an offer on a BLT contract, the sellers told the broker that they would accept my offer but just had to check their loan balance. They checked, found out they owed MUCH more than they realized and said they couldn't accept an offer for anything less than full asking price ($95 per point) with buyer paying closing and MFs. Good luck with that.

Bottom line, financing can work, but only with an iron-clad plan to pay off the loan quickly.

 

[vicki_c]

I put in an offer on a BLT contract, the sellers told the broker that they would accept my offer but just had to check their loan balance. They checked, found out they owed MUCH more than they realized and said they couldn't accept an offer for anything less than full asking price ($95 per point) with buyer paying closing and MFs. Good luck with that.

Isn't that crazy - and I guess it goes back to the original question - how could you put something up for sale and not know what you owe on it? Not so much to know how to price it (not in this market anyway) but to know what your real situation is - how much you might get on the sale and how much you might have to bring to the table and whether it was feasible for you at all?

 

[marynvince]

I can honestly see how financing a resale contract in the short term can work (as long as you have a plan for payoff so the interest doesn't eat away at all your savings).

But the problem comes with financing a direct purchase. Most (not all) direct buyers probably have no plan to pay off their purchase in a reasonable time (because the cost is so high), but it also leaves them without an escape plan if they find they need to sell DVC.

I put in an offer on a BLT contract, the sellers told the broker that they would accept my offer but just had to check their loan balance. They checked, found out they owed MUCH more than they realized and said they couldn't accept an offer for anything less than full asking price ($95 per point) with buyer paying closing and MFs. Good luck with that.

Bottom line, financing can work, but only with an iron-clad plan to pay off the loan quickly.

Whether you buy direct (we did and financed and quickly switched to a disney visa balance transfer at a crazy low % for life with NO fees) and paid off in a few years. Then we bought a resale and paid cash. the reverse of your example but a situation that worked great for us. Every situation and individual is different. Some are fiscally responsible and some not so much. Even if you can pay cash, it doesn't necessarily mean you should or can "afford" the purchase.

 

[ELMC]

Isn't that crazy - and I guess it goes back to the original question - how could you put something up for sale and not know what you owe on it? Not so much to know how to price it (not in this market anyway) but to know what your real situation is - how much you might get on the sale and how much you might have to bring to the table and whether it was feasible for you at all?

All of those questions involve logic, and timeshare sales are not about logic, they're about emotion. That's why you spend the first 90 minutes of the sales presentation talking about all the great vacations you are going to take and how many points you will need and how happy and magical your life will become. Then the salesperson will take about 30 seconds to tell you the gross cost before shifting your focus to a much smaller and reasonable sounding monthly payment. As soon as you start to talk about the numbers they go right back to the discussions of the wonderful vacations, etc. A skilled timeshare salesperson gets you to say yes to that, the monthly payments or dollars spent are just an ancillary detail.

I would imagine that many timeshare owners go their entire lives without actually breaking down the cost of their points, stays, etc. For some people it ruins the illusion when you look at the guts of the contract as opposed to the happy face on the surface. That's not how I do things, but I imagine it is a much more pleasant way to go through life...assuming everything works out.

 

[kamik86]

All of those questions involve logic, and timeshare sales are not about logic, they're about emotion. That's why you spend the first 90 minutes of the sales presentation talking about all the great vacations you are going to take and how many points you will need and how happy and magical your life will become. Then the salesperson will take about 30 seconds to tell you the gross cost before shifting your focus to a much smaller and reasonable sounding monthly payment. As soon as you start to talk about the numbers they go right back to the discussions of the wonderful vacations, etc. A skilled timeshare salesperson gets you to say yes to that, the monthly payments or dollars spent are just an ancillary detail.

I would imagine that many timeshare owners go their entire lives without actually breaking down the cost of their points, stays, etc. For some people it ruins the illusion when you look at the guts of the contract as opposed to the happy face on the surface. That's not how I do things, but I imagine it is a much more pleasant way to go through life...assuming everything works out.

Maybe I had a weird guide but when I bought direct in 2010 my guide did tell me how much the full price was and how much that was per point (I had already figured it out because I'm an engineer and I like numbers but he told me... and they matched my numbers so he was right too!) I paid my DVC off last year something like 14 months after I bought it. About a year after I bought, and no I couldn't have afforded to buy it all at once when I did...

The same with the car I bought last May. I paid it off in less then a year (probably 8 or 9 months but not sure exactly without going to look) I didn't have the cash to buy that right away either, I planned to wait a few more months and then the car I was driving died and it woudn't have been worth it to fix it for just the few more months.

 

[ssawka]

All of those questions involve logic, and timeshare sales are not about logic, they're about emotion. That's why you spend the first 90 minutes of the sales presentation talking about all the great vacations you are going to take and how many points you will need and how happy and magical your life will become. Then the salesperson will take about 30 seconds to tell you the gross cost before shifting your focus to a much smaller and reasonable sounding monthly payment. As soon as you start to talk about the numbers they go right back to the discussions of the wonderful vacations, etc. A skilled timeshare salesperson gets you to say yes to that, the monthly payments or dollars spent are just an ancillary detail.

This is why I didn't even bother contacting DVD until we were sure we were ready to buy. This is how I handle almost all major purchases. I do all the research online and by the time I talk to a salesperson, I already know I'm going to buy. It makes it real easy on the salesperson because they don't have to try to "sell it to me". I get right down to the numbers with them.

 

[princessaloha]

Isn't that crazy - and I guess it goes back to the original question - how could you put something up for sale and not know what you owe on it? Not so much to know how to price it (not in this market anyway) but to know what your real situation is - how much you might get on the sale and how much you might have to bring to the table and whether it was feasible for you at all?

I have an actual real world experience that may answer your question, at least for a few situations.

A few years back I was part of a conversation with some work associates regarding their mortgages and loans. Surprisingly none of them were aware that the majority of their monthly payments for the first few years (ok more like 7-11 years on a 30 year fixed, 11 years on average is when the payments usually become 50% interest/50% principle) were going to the interest portion of their loans. In their minds they believed that their loans were less ALL the monthly payments. Maybe a few bucks went to the bank interest but most of the payments were reducing their principle loan amount. What a shock when some of them found out that after years and years of payments, their actual loans had only decreased a few thousands of dollars.

Maybe it's the same here in DVC world. People are NOT paying attention to the actual numbers. They think they bought $20,000 worth of DVC and since they're paying (hypothetically) $200 a month for the past 5 years, $200 x 12 x 5 = $12,000, so they only owe $8,000. They set a selling price based upon those numbers (maybe even broker commissions, a small profit, etc). When an offer comes that hits their target, they accept. It's not until the paper work with REAL ACTUAL numbers come their way that they realize they need a lot more money just to break even.

Just my 2 cents.

 

[Lucia_27]

I have an actual real world experience that may answer your question, at least for a few situations.

A few years back I was part of a conversation with some work associates regarding their mortgages and loans. Surprisingly none of them were aware that the majority of their monthly payments for the first few years (ok more like 7-11 years on a 30 year fixed, 11 years on average is when the payments usually become 50% interest/50% principle) were going to the interest portion of their loans. In their minds they believed that their loans were less ALL the monthly payments. Maybe a few bucks went to the bank interest but most of the payments were reducing their principle loan amount. What a shock when some of them found out that after years and years of payments, their actual loans had only decreased a few thousands of dollars.

Maybe it's the same here in DVC world. People are NOT paying attention to the actual numbers. They think they bought $20,000 worth of DVC and since they're paying (hypothetically) $200 a month for the past 5 years, $200 x 12 x 5 = $12,000, so they only owe $8,000. They set a selling price based upon those numbers (maybe even broker commissions, a small profit, etc). When an offer comes that hits their target, they accept. It's not until the paper work with REAL ACTUAL numbers come their way that they realize they need a lot more money just to break even.

Just my 2 cents.

I think you are absolutely right! My DH is a smart guy, but if I mention the words "loan amortization schedule" his eyes will glaze over and to him I start to sound like the teacher from Peanuts.... It's just not his thing - and happily he lets me handle this part of our life. Just like on a regular basis I need him to explain to me how the quota points work in his weekly $10 golf game.

 

[ELMC]

I have an actual real world experience that may answer your question, at least for a few situations.

A few years back I was part of a conversation with some work associates regarding their mortgages and loans. Surprisingly none of them were aware that the majority of their monthly payments for the first few years (ok more like 7-11 years on a 30 year fixed, 11 years on average is when the payments usually become 50% interest/50% principle) were going to the interest portion of their loans. In their minds they believed that their loans were less ALL the monthly payments. Maybe a few bucks went to the bank interest but most of the payments were reducing their principle loan amount. What a shock when some of them found out that after years and years of payments, their actual loans had only decreased a few thousands of dollars.

Maybe it's the same here in DVC world. People are NOT paying attention to the actual numbers. They think they bought $20,000 worth of DVC and since they're paying (hypothetically) $200 a month for the past 5 years, $200 x 12 x 5 = $12,000, so they only owe $8,000. They set a selling price based upon those numbers (maybe even broker commissions, a small profit, etc). When an offer comes that hits their target, they accept. It's not until the paper work with REAL ACTUAL numbers come their way that they realize they need a lot more money just to break even.

Just my 2 cents.

I wonder what people who purchased direct and financed would say at the time of purchase if there was a line that said, by the end of the 10 years you will have paid $XXXX.XX in interest. I wonder if it would change any minds.

 

[ssawka]

Are you saying that DVC payments are tax deductible? I thought it was only home mortgages that held that status.

You would have to check with your tax adviser, but generally interest paid on timeshares are tax deductible depending on how they are financed. If financed through Disney, then DVC is a mortgage because the collateral is a real estate interest. There are other rules that apply, such as you can only own one other house.

 

[princessaloha]

I wonder what people who purchased direct and financed would say at the time of purchase if there was a line that said, by the end of the 10 years you will have paid $XXXX.XX in interest. I wonder if it would change any minds.

Good question. I remember seeing charts in one of my finance classes years ago that showed the actual price of the average home loan is doubled (sometimes much more) by the time a 30 year fixed home loan was paid off. You think you're buying a $500,000 house and when it's all said and done you will have paid over a $mil but no one takes that into consideration . Banks figure out a long time ago that the average person will sell/move on average every 10 years so they've set up the system to make the majority of their money by the 11th year mark. Pretty slick.

Same for credit cards, which are essentially another type of loan if you carry a balance. There are sites you can input how long it will take to pay off a small balance by only playing the minimum. Literally years and the interest can be double, triple, plus more than the original purchase costs.

I wonder if every purchase made with a cc came with column listing the actual cost of item if only paying the minimum would make some stop and evaluate whether they really needed that item at that time...

 

[ELMC]

Good question. I remember seeing charts in one of my finance classes years ago that showed the actual price of the average home loan is doubled (sometimes much more) by the time a 30 year fixed home loan was paid off. You think you're buying a $500,000 house and when it's all said and done you will have paid over a $mil but no one takes that into consideration . Banks figure out a long time ago that the average person will sell/move on average every 10 years so they've set up the system to make the majority of their money by the 11th year mark. Pretty slick.

Same for credit cards, which are essentially another type of loan if you carry a balance. There are sites you can input how long it will take to pay off a small balance by only playing the minimum. Literally years and the interest can be double, triple, plus more than the original purchase costs.

I wonder if every purchase made with a cc came with column listing the actual cost of item if only paying the minimum would make some stop and evaluate whether they really needed that item at that time...

Well recently they passed laws requiring credit card companies to indicate on the billing statements how different payments will affect the length of time it takes for a cardholder to pay off their balance. It says something like "minimum payment due $xx.xx. If you pay the minimum it will take 26 years to pay off your balance. If you pay $yy.yy it will take 8 years.

 

[princessaloha]

Well recently they passed laws requiring credit card companies to indicate on the billing statements how different payments will affect the length of time it takes for a cardholder to pay off their balance. It says something like "minimum payment due $xx.xx. If you pay the minimum it will take 26 years to pay off your balance. If you pay $yy.yy it will take 8 years.

I was thinking more in line with each item. That $5 starbucks at xx cents will take xx years and cost a mortgage payment... just kidding

 

[vicki_c]

I have an actual real world experience that may answer your question, at least for a few situations.

A few years back I was part of a conversation with some work associates regarding their mortgages and loans. Surprisingly none of them were aware that the majority of their monthly payments for the first few years (ok more like 7-11 years on a 30 year fixed, 11 years on average is when the payments usually become 50% interest/50% principle) were going to the interest portion of their loans. In their minds they believed that their loans were less ALL the monthly payments. Maybe a few bucks went to the bank interest but most of the payments were reducing their principle loan amount. What a shock when some of them found out that after years and years of payments, their actual loans had only decreased a few thousands of dollars.

Maybe it's the same here in DVC world. People are NOT paying attention to the actual numbers. They think they bought $20,000 worth of DVC and since they're paying (hypothetically) $200 a month for the past 5 years, $200 x 12 x 5 = $12,000, so they only owe $8,000. They set a selling price based upon those numbers (maybe even broker commissions, a small profit, etc). When an offer comes that hits their target, they accept. It's not until the paper work with REAL ACTUAL numbers come their way that they realize they need a lot more money just to break even.

Just my 2 cents.

That is interesting and you're probably on track. Still crazy to me - you think just when you did your taxes (in the mortgage example) you would notice, hey, I paid $20K in interest last year that I can write off! I am no financial genius, but perhaps people like me (and us) are smarter than average!

 

[kamik86]

I think you are absolutely right! My DH is a smart guy, but if I mention the words "loan amortization schedule" his eyes will glaze over and to him I start to sound like the teacher from Peanuts.... It's just not his thing - and happily he lets me handle this part of our life. Just like on a regular basis I need him to explain to me how the quota points work in his weekly $10 golf game.

To be honest I barely understand the whole amortization schedule thing... I don't know what DVCs was, or the loan on my car... I'm not sure you really have to understand the entire concept. You just need to know that the first few years is more interest.

DVC's website shows how much of the payment was to interest so its not hard to look up. Ones that don't show that at least show the new balance after the payment and by that point I can definitely figure out how much was interest.

 

[princessaloha]

That is interesting and you're probably on track. Still crazy to me - you think just when you did your taxes (in the mortgage example) you would notice, hey, I paid $20K in interest last year that I can write off! I am no financial genius, but perhaps people like me (and us) are smarter than average!

Thank you for including me in the "us are smarter" category, although...just between the two of us, I don't think I'm necessarily one of the sharpest knife in the drawer

I've been very lucky in life that I've accidentally stumbled into a few great financial classes, with great teachers at pivotal times in my life ie. high school, college, early 20's (literally on vacation and walked past a weekend seminar and went in, lol). I've always wished that schools offered more basic real world concepts than say trig classes. I had a friend that took years to comprehend that just because she still had checks, didn't mean she still had money in the bank.