Adding Up the Actual Cost of a Timeshare

The concept of vacation ownership suggests that owning a functional real estate interest or timeshare can be a more cost-effective option compared to repeatedly paying for hotel rooms when taking frequent vacations. The belief is that owning a piece of paradise is better than saving for hotel expenses every year.

However, the reality of timeshare ownership often falls short of this ideal. Even with deeded timeshares and fixed-week fractional interests, there are various annual fees such as maintenance fees, property taxes, HOA fees, and special assessments that can add up and become a financial burden. The current trend of vacation clubs with point systems, exchange company fees, and complicated reservation systems has made the process even more complex and expensive. Unfortunately, timeshare sales presentations often do not disclose the true cost of ownership, and the full extent of financial obligations may only become apparent when the first set of bills arrive.

This article aims to provide readers with an educational overview of the real cost of timeshare ownership, by breaking down the various expenses involved, such as the purchase price, mortgage, tax payments, and special assessments. It emphasizes that in many cases, buying a timeshare may not be a prudent financial decision.

The Costs That Come With a Timeshare

Even seasoned buyers may be taken aback to discover that a timeshare is not as beneficial as they initially thought once they take into account all the associated expenses. Therefore, being well-informed is crucial to avoid falling victim to timeshare companies.

Now, let’s delve into a comprehensive examination of the various expenses that come with owning a timeshare.

The Timeshare Purchase and Mortgage

When considering the cost of a timeshare, many people only think of the upfront payment made to the developer for the timeshare interest. This cost can vary depending on the type of timeshare, whether it’s a fixed- or floating-week deeded timeshare or a points-based vacation club like Hilton Grand Vacations Max, Marriott, or Disney Vacation Club.

Regardless of the type of timeshare, the larger the purchase, the higher the price tag. According to the American Resort Development Association (ARDA), the average cost of a timeshare interval is over $24,000, with some exceeding $100,000. For the purpose of this example, let’s assume a purchase price of $30,000 with a $3,000 down payment, requiring a $27,000 mortgage to cover the remaining amount.

However, unlike home loans, timeshare mortgage interest rates can be exorbitant, sometimes reaching up to 20%. Let’s assume a common interest rate of 15.9% for ten years. To calculate the total cost, we need to add the principal ($27,000) to the mortgage interest paid over ten years. Under these terms, the $30,000 timeshare would actually cost $54,072.51 over ten years, with nearly the same amount paid in interest ($27,072.51) as in principal over 120 payments.

If this number comes as a surprise, it’s important to note that we haven’t even discussed other fees associated with timeshare ownership yet.

Annual Timeshare Maintenance Fees

Based on ARDA’s 2019 research, maintenance fees for timeshares can vary significantly, ranging from $640 for a small studio to almost $1,300 for a three-bedroom unit. Let’s assume an annual maintenance fee of $1,000 for seven nights of timeshare usage per year in our hypothetical scenario. It’s important to note that these fees are not static and are subject to inflation, just like other expenses.

For our example, let’s consider an inflation rate of 8.5% per year. This would mean that over 10 years, you would end up paying $17,096 in maintenance fees alone, and in 20 years, the figure would escalate to $53,489. However, it’s essential to note that the actual amount you may pay in 20 years depends on the specific company you’re dealing with, and you can estimate the inflation of your maintenance fees by using Centerstone Group’s Maintenance Fee Calculator, which takes into account the current US inflation rate.

Timeshare Property Taxes, Homeowners Association (HOA) Fees, and Special Assessments

Timeshare ownership entails various legal obligations, taxes, and fees that are mandatory and must be paid to avoid foreclosure. Property taxes are one such cost, which will vary depending on the location and size of your timeshare interest. Assuming an annual property tax of $500, you would end up paying $5,000 over 10 years and $10,000 over 20 years.

In addition, membership in the homeowner’s association (HOA) is another cost associated with timeshares. The HOA fee, which covers expenses for maintaining roads, amenities, and common areas within the resort, is typically around $400 per year, amounting to $4,000 over 10 years and $8,000 over 20 years. However, it’s important to note that in case of a natural disaster or special renovations needed by the resort, additional fees in the form of special assessments may be required. While it’s difficult to predict the exact amount of these fees, for our example, let’s assume an additional cost of $500 in special assessments every 10 years, totaling $1,000 over 20 years.

Fees for Using, Reserving, and Exchanging Your Timeshare

So, What Is The Total Cost of a Timeshare?

After taking into account all the mentioned expenses, the total cost of a timeshare unit worth $30,000 over a ten-year period is $84,818.51. Assuming you use all seven nights of your timeshare every year, your cost per night for the timeshare unit would be $1,211.69, which is based on the improbable scenario of utilizing all the nights each year. If you do not use all your nights, the average cost per night would only increase.

Over a 20-year period, the total amount paid for the timeshare would be $126,861.51, which is more than four times the original price of the timeshare unit. Even if you were to use every night of your timeshare over 20 years, which is rare, you would still end up spending $906.15 per night. While this may be slightly better than the ten-year plan, it is still significantly more expensive than staying at a high-end hotel or resort.

Tired of Paying Through the Nose? Centerstone Group Can Help

Given the financial costs associated with timeshare ownership, it’s understandable that many owners are actively seeking ways to exit their contracts. The Centerstone Group offers assistance in this regard as a reputable company specializing in timeshare exit solutions. With years of experience, our team is skilled in helping clients achieve ethical and legal exits from their timeshare contracts. We employ various strategies, such as contract cancellation, unique pressure campaigns, and collaboration with our legal partners, to find successful solutions for our clients. As a BBB A+-rated company with positive reviews from satisfied clients, we would be pleased to assist timeshare owners who wish to put an end to the financial burden. Contact us for a complimentary consultation and case review to explore your options further.