The Pros and Cons of Buying a Timeshare

It can save you vacation dollars overall, but there are some drawbacks

Tranquil sunset ocean view beyond silhouette of couple on luxury home
••• Hoxton/Tom Merton / Getty Images

Owning a timeshare more or less means that you share time with other vacationers. You have access to a "share" of a property at a specific "time." Timeshares are sold for cruises, recreational vehicles, campgrounds, and many other types of travel-oriented properties, but their most popular use is for condominiums at large timeshare resorts.

Many flexible ownership variations give you options beyond a single timeshare destination and one specific time of year, but there are some drawbacks.

A Little History

Timeshares became popular in Europe in the 1960s when escalating property prices made it nearly impossible for most people to afford full-time vacation homes. Developers were able to reduce the costs for each owner by creating a shared type of ownership, and this allowed resort owners to successfully market and sell properties to a greater number of clients.

Timeshare Costs

Timeshare owners pay for access to their unit for a given period of time. They also typically share maintenance fees, management fees, and upkeep costs for common areas such as pools and tennis courts.

The average annual maintenance fee was just under $1,000 in 2018, according to the American Resort Development Association. You might have closing costs associated with buying your share as well, and you might even be responsible for a portion of property taxes.

Fees vary and should be disclosed when you buy a unit. It's important to read all the fine print before you purchase a timeshare because you're most likely committing to paying at least some of its annual costs for a substantial period of time.

Ownership Variations

Some examples of different types of timeshare ownership include:

  • Fixed Unit, Fixed Week, or Deeded Timeshare: You'll receive a deed that states that you own a specific timeshare property at a specific time each year. For example, you might have Thanksgiving week every year in the same two-bedroom condo unit on the second floor with ocean views.
  • Floating Time Agreement: The dates when you can use your timeshare are flexible with this type of arrangement. Reservations are on a first-come-first-served basis because all owners are likely to have the same option. You probably won't get the same unit each time, and your dates might be completely flexible or limited to certain times or seasons during the year.
  • Right-to-Use Timeshare: This variation is a lease. You no longer have any right to the property at the lease's end. Lease terms are often long, typically 20 to 30 years, and the only way to get out of one is to sell your share to another buyer. Some developers offer secondary marketplaces for their resorts, while others leave you to sell on your own.
  • Vacation Clubs or Points-Based Programs: Timeshare owners can choose from a variety of vacation destinations with this option. Each stay uses points, and the points can vary for the timeshare unit and the season purchased. The Disney Vacation Club is an example of a points-based vacation club, with resorts and cruises all over the world available to its members.

Buying From a Timeshare Developer

Developers are the people who build and sell new timeshares. Their sales practices are usually controlled by state laws in the U.S., so familiarize yourself with the laws in the state where you plan to buy before purchasing. Research the commission schedules for the state where the development is located. Agent pages are often the best places to find information about the laws that govern the initial sale of timeshares.

Developers often offer direct financing for new timeshares, but most resales—units purchased from individual owners—are paid for in cash.

Be sure that you understand timeshare laws that apply to purchases made outside the U.S. before you buy a unit on foreign soil.

Buying a Timeshare Resale

Preowned timeshares or resales can typically be purchased for a fraction of the cost of new units. Resale values can give you a clue as to the desirability of the timeshare program and its properties.

Other Financing Options

Financing directly through the developer can cost you dearly in interest rates. You might be better off finding the cash through some other means if you want to buy a timeshare. Some options include:

  • Home equity loans tap into the difference between your primary home's value and its outstanding mortgage balance. You might have $15,000 or so at your disposal if your home appraises at $300,000 and your loan balance is $275,000 or so, allowing for closing costs. But keep in mind that your home acts as collateral for this type of loan, so your lender can foreclose if you default. That said, the interest rate on a home equity loan should be relatively palatable.
  • You can borrow from your retirement funds if a great annual vacation now is more important to you than retiring in comfort somewhere down the line. The plus side to this option is that your credit score doesn't enter the equation in any way, but check with a tax professional to make sure you don't run afoul of the IRS. That would be the case if you simply withdrew from your retirement accounts rather than borrow from your savings.
  • You might consider other loan sources as well. Maybe you have a credit card with a generous credit limit, but using this option will generally result in hefty interest rates as well—although typically not quite as much as arranging the financing through the developer. Personal loans are typically better than using credit cards in this scenario.
What We Like
  • Committing to a timeshare will mean less expensive vacations overall. It's usually cheaper over the long run than resort packages or other hotel accommodations and dining out every night while you're away.

  • This industry is much more regulated than it was in days gone by, so it's not likely you'll get burned if you choose a reputable developer.

What We Don't Like
  • This is not an investment that's going to appreciate in value, like buying a vacation home. Its value is its value...indefinitely.

  • You might find yourself in a jam if you later want to sell your timeshare. Resale options can be limited. Don't commit unless you're sure you'll want to use the share for many years to come—which means vacationing in the same place year after year after year.