Home Vs Timeshare Mortgage
Home Mortgages vs. Timeshare Mortgages
The word “mortgage” carries various connotations. One may cringe at the debt they’ve acquired because of a mortgage, while another may rejoice over it because it means they’re entering a new chapter in their life of home ownership. Regardless, there are a plethora of resources and services dedicated to educating consumers about the pros and cons of home mortgages. Most of these resources are also held to maintain ethical practices that serve to help borrowers find the best solution to align with their current financial situation. Unfortunately, this practice isn’t followed across the board; timeshare mortgage processes are a completely different story.
In relation to home mortgages, the relationship of lender and borrower doesn’t end after one meeting. It’s typical for background checks, employment verification, and even courses that need to be completed before any home mortgage agreements are signed. This is a thorough process because lenders want to protect themselves and the consumer from any liabilities they can’t afford. The process for mortgage loans to own real estate is a distinguishing difference between home and timeshare mortgages.
We’ve heard of the dreaded timeshare presentation. Some consumers have shared stories where they were lured into what was advertised as a quick walk-through of their resort that turned into 4-5 hour long interrogations. Unfortunately, this experience usually ends in some consumers signing up for a timeshare that they can’t afford. This includes dropping thousands of dollars for a down payment and possibly signing up for a credit card or loan owned by the timeshare or referred third party on the spot.
A mortgage application for a timeshare doesn’t require the same or similar procedure that other real estate mortgages do, which hurts the consumer. Although home mortgages are often higher costs than timeshares, consequences of failing to pay back the lender as timeshare owners and home owners are comparable. For instance, if a timeshare or home owner defaults on payment it can end up in foreclosures, bankruptcy, and even wage garnishments. Some lending businesses won’t mortgage timeshares because they are considered high-risk lending. The average interest rate on a timeshare mortgage is 14% while the average interest rate on a home mortgage is only 4.59%¹. It truly sheds light on the risks timeshare developers put on consumers since they aren’t pre-qualifying the financial stability of the families they approach to purchase timeshares.
Another large contrast between having a mortgage on a home verses a mortgage on a timeshare, is that as the home owner, you are the sole benefactor of the property. As a timeshare owner, your mortgage funds the developer. ARDA reported in 2016 that 79% of resorts offer some form of rental program². Imagine having to pay your home mortgage while others were being allowed to use your property and utilities without having the same financial responsibilities you did, and their payment of usage went directly to the mortgage lender instead of you as an owner. Now imagine how it would feel if your lender said you couldn’t access your home because third parties had already reserved use of it.
The value between home mortgages and timeshare mortgages is also a large difference. If a home owner is ready to move onto another home, they can list their house on the market, and more often than not, there’s equity to reap from the sale. The timeshare sale process on the other hand is limited and again is another poorly regulated industry. Several consumers have fallen into timeshare resale scams. Most people who can exit their timeshare successfully usually don’t receive any money back, despite what they’ve been told during the sales presentation.
We urge consumers to educate themselves before signing into a timeshare mortgage. These are legally binding contracts that unfortunately are not heavily regulated as other consumer purchases. No company should pressure you on what you should or shouldn’t purchase without allowing you to sleep on it before making a decision. If you are thinking of purchasing a timeshare, take the time to research the terms of the contract, and make sure timeshare ownership makes sense for your financial standing as well as your lifestyle before making the purchase.
Remember: even if the channel you’re considering is all the rage right now, it might not fit your brand. Always make informed decisions that directly relate to your company. Otherwise, your message won’t be delivered to its intended audience and you’ll have wasted time, effort and money.