It might be happening.....

[Nemo14]

So ignoring Hakuna's spiteful attempts at trying to be funny, the offer I made the seller has been accepted. Can't do anything until Monday, which is a good thing. It gives us time to sit down with our CPA and go over the contract, how it will affect our tax situation and all that good stuff.

Congratulations - I know how much research you've put into this. Hope it all works out for you.

 

[Nemo14]

After a completely sleepless night, I have decided against making the purchase. Not sure if anyone is interested in the reasons, but for those that are, here is why I am going to pass.

-I can not buy the contract without having to finance it at this time. I've worked very hard to get my wife and I completely debt free, and the idea of taking on a 5 year loan just seemed to risky with our economy in its current state. I decided, I am going to try and save the money for about 18 months and look into a resale contract at that time, that I wouldn't have to finance any of.

-I love the Boardwalk, but the contract expires in 2042. As time goes on, if anything were to force me into a situation where I needed to sell it, the contract would be worth less and less as the time remaining on it would be shorter and shorter.

-Not to get too political, but we have an election coming up and our tax liability may change greatly depending on who is running the country.

On the bright side, this is the last you'll hear of me debating on whether DVC is a good thing or bad thing. When I crunched the numbers, I realized, there is no doubt, that when you compare apples to apples, DVC is a fantastic idea. Unfortunately, I simply don't have the cash up front to make the purchase, and for me, having to finance it and pay interest on that loan, and having to have that 5 year cloud hanging over my head, I simply would not feel comfortable. I guess I truly understand now why so many owners say buying really is a personal decision.

Bleep, bleep, bleep....That's all folks!

I spoke too soon.

You know what's best for you, and I respect your decision.

 

[GoofGoof]

I think you made the right financial decision. Taking out a loan to pay for a DVC purchase pretty much destroys any financial benefit you might have eventually derived from a DVC. If you really want to become a member, consider a small contract so you can get the other benefits such as AP discounts.

This might actually work for you. At $150 per AP savings you would be saving at least $300 a year (not sure if you have kids, maybe more). If you picked up a 50 point contract resale (hard to find) your fees would only be $281 so the savings would more than cover your fees. You would also have to rent 50 less points a year saving you $500 minimum. Your breakeven would be pretty quick depending on how much you buy for.

 

[Jimmy Thick]

Thank God a decision was made, now I can finally get some sleep.


Jimmy Thick- I'll dream of Jeanie.

 

[flynnibus]

GoofGoof - only two properties, but the second property must also be qualified as a vacation home. If he rents out the DVC, it would not make the cut because he would have to stay there at least 14 days a year. But if all rentals are under the table.. and he doesn't 'rent' it, then there is no stay requirements (but you can only have 1 vacation home).

 

[flynnibus]

Besides trouble securing the loan - I wouldn't let a little bit of interest scare you away. Besides, you obviously are going to vacation there in the meantime, so you'll be throwing money to the wind to do that, vs putting the money towards the payoff. And just double down on your savings in the interim if the financing scares you and pay the loan off quicker.

Can't let 2042 scare you.. that's the name of the game

Try to get a home equity line of credit open large enough to do this.. so you can jump on any offer that comes up.. and then diligently pay the loan off quickly.

 

[GoofGoof]

GoofGoof - only two properties, but the second property must also be qualified as a vacation home. If he rents out the DVC, it would not make the cut because he would have to stay there at least 14 days a year. But if all rentals are under the table.. and he doesn't 'rent' it, then there is no stay requirements (but you can only have 1 vacation home).

Good point. If you rent it and actually follow the rules and report rental income you can move the mortgage interest to schedule E as a deduction against rental income as opposed to schedule A as interest on a second home. Your best bet (if you have to finance) is to take out a home equity loan and use that to finance the purchase. The rates are lower and you will have no issues deducting it. The downside is if you default on the loan your house is put up as collateral instead of the timeshare.

 

[mrerk]

I wouldn't let the need to finance deter you. You'll only pay about $4000 in interest over 5 years borrowing $25000 @ 6%. You'll pay more than that paying out of pocket for your next trip.

 

[ParentsOf4]

I wouldn't let the need to finance deter you. You'll only pay about $4000 in interest over 5 years borrowing $25000 @ 6%. You'll pay more than that paying out of pocket for your next trip.

The problem with paying interest is that it pushes out the break-even point (i.e. the point at which the DVC purchase starts to become cheaper than renting points) while incurring debt today for something that isn't financially beneficial for a long time. It's not a question of whether captainkidd takes a WDW vacation, only a question of what is the cheapest way for him to do it.

In captainkidd's case, it could be 12 years to reach the break-even point, if you assume he pays $60/pt cash to purchase a DVC vs. renting at $12/pt. So he'll go a dozen years before he's ahead of the game financially. That's already a long time. Add another $4000 to the cost and the break-even point approaches 15 years. 15 years. That's a really long time and a lot of Disney vacations for the DVC purchase to make financial sense. Meanwhile, he'd spend over $25,000 today, money he doesn't have and needs to borrow. It would be one thing if captainkidd had money that was just sitting in the bank. But he'd have to borrow the money. It just doesn't make financial sense to incur that kind of debt today to possibly gain a financial advantage 15 years from now.

 

[captainkidd]

The problem with paying interest is that it pushes out the break-even point (i.e. the point at which the DVC purchase starts to become cheaper than renting points) while incurring debt today for something that isn't financially beneficial for a long time. It's not a question of whether captainkidd takes a WDW vacation, only a question of what is the cheapest way for him to do it.

In captainkidd's case, it could be 12 years to reach the break-even point, if you assume he pays $60/pt cash to purchase a DVC vs. renting at $12/pt. So he'll go a dozen years before he's ahead of the game financially. That's already a long time. Add another $4000 to the cost and the break-even point approaches 15 years. 15 years. That's a really long time and a lot of Disney vacations for the DVC purchase to make financial sense. Meanwhile, he'd spend over $25,000 today, money he doesn't have and needs to borrow. It would be one thing if captainkidd had money that was just sitting in the bank. But he'd have to borrow the money. It just doesn't make financial sense to incur that kind of debt today to possibly gain a financial advantage 15 years from now.

This was something else I considered. The purchase price was $68 per point. For next year's trip, I'm renting for $11 per point. And the interest rate is 13.9% through Timesharelending.

 

[ParentsOf4]

This was something else I considered. The purchase price was $68 per point. For next year's trip, I'm renting for $11 per point. And the interest rate is 13.9% through Timesharelending.

$68/pt for 350 points at BWV is a crazy price. sellmytimesharenow.com currently has a listing for 350 points for $20,000 ($57.14/pt). We used sellmytimesharenow.com to purchase 240 points at BWV for $55/pt. The demand for 350 points is rare so, with a little patience, you should be able to get that price or lower. I count at least 8 current listings for 350 at BWV, which is a sizeable chunk of BWV's current listings. Many of these date back to May or earlier. If you are determined to purchase a DVC, consider making low offers on each one at a time. Expect a lot of rejection but you might find one motivated seller.

 

[GoofGoof]

I wouldn't let the need to finance deter you. You'll only pay about $4000 in interest over 5 years borrowing $25000 @ 6%. You'll pay more than that paying out of pocket for your next trip.

It's actually closer to $10K in interest over 5 years at 13.9% interest. That would add $27 per point to the cost of 350 points. If he is buying at $68 a point that pushes your purchase price to $95 after paying the interest. If you could borrow with a 3% HE loan then the interest would be less than $2K and I would agree that it is not material to your overall purchase.

 

[GoofGoof]

I agree with your analysis but, fundamentally, does it make good fiscal sense to take out a Home Equity Loan to finance a vacation?

Not for me, but before 2008 I bet it was happening a lot. I really wouldn't want my house posted as collateral for a timeshare. On the flip side, I would have a hard time paying 13.9% interest on anything these days. If you know you are going to pay it off even sooner than 5 years (which I think Kidd said he wanted to do) then maybe it makes sense as a temporary bridge loan and is still a better move than financing at 13.9%. I agree that the best move is to save and wait to buy in my opinion.

I forgot to mention in my previous post that the interest would be tax deductible so you would be getting something back from the IRS. Depending on your tax bracket you might get around 25% of the $10,000 back at tax time, but it would still add over $20 per point to the price even after tax savings.

 

[The Mom]

Thank you all for contributing a lot of useful information in making a decision to buy or not to buy, with the understanding that everyone has to do his/her own research, and be aware of the financial impact. What is perfect for family A might be a financial disaster for family B. But only the person making the decision is in a position to decide if it's a good or bad one.