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When and how to refinance your timeshare
Is your timeshare becoming a financial burden? Here's how to refinance.
The average sales price for a timeshare is $24,140, according to the American Resort Development Association. This doesn’t include the annual maintenance fees, which can increase over time. As a timeshare owner, you’re responsible for paying the fee every year, regardless of whether you stay at the timeshare or not.
If your timeshare isn’t working out, or it’s simply too expensive now, refinancing may be an option.
When to refinance a timeshare
You may want to consider refinancing your timeshare loan or paying it off with another type of loan if you’re experiencing any of these scenarios:
- Your interest rate is too high. With developer financing, timeshare interest rates can be as high as 20% — ouch. Instead, you can try to refinance with a specialized timeshare loan with a lower rate or different loan type, such as a HELOC.
- You want to free up your monthly cash flow. By refinancing or switching to a lower rate loan, you can significantly reduce your monthly payments.
- You’re facing foreclosure on your timeshare. If you’re at risk of foreclosure because payments are too high, refinancing could help you obtain more affordable payments. But if that won’t work, you could try other options, such as selling it back to the resort. Just know that refinancing anything can be difficult if you have multiple missed payments — lenders prefer refinancing loans with a consistent payment history.
Refinancing a timeshare may not make sense for everyone
It may be better to keep the timeshare as-is if you’re in one or more of these situations:
- Your timeshare is proving to be a cheaper way to vacation.
- You don’t have good credit and may not be able to secure a better rate.
- You want to get rid of the timeshare altogether, even if it costs money to do so.
How to refinance a timeshare in 5 ways
The steps you take to refinance your timeshare depend on the method. Refinancing is using another loan to pay off an existing loan. However, since there’s no equity in timeshares, the refinancing process is a little different.
Keep in mind that some of these options can be risky and could lead you into even more debt if you’re not careful.
1. Specialized lenders
Most banks won’t refinance a timeshare mortgage because the resale value is low. However, some lenders specialize in timeshare refinancing and can offer you a lower payment.
For example, LightStream — a branch of SunTrust bank — offers timeshare refinance loans to US citizens with good credit. While interest rates vary, there are no original fees or prepayment penalties and you can apply online.
Compare online lenders for timeshares — they usually offer more competitive rates since they don’t operate physical branches.
2. Personal loan
If you have a solid credit score, you may qualify for a non-collateral, personal loan that can be used to pay off your developer-financed loan at a lower rate — usually around 8% to 12%. While rates are typically higher than HELOCs, they’re likely lower than the rates offered by timeshare agents.
Use our table to compare personal loan provider’s rates and loan amount options side by side.
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3. Home Equity Line of Credit (HELOC)
If you’ve built up enough equity in your primary home, you may qualify for a HELOC at a significantly lower interest rate compared to your current loan. Once approved, you can use the HELOC to pay off your higher-rate, developer-financed loan.
4. Credit cards
If you have a high credit card limit with low or no interest for a time, you might be able to use it to pay off your timeshare with a credit card. But be aware this can be risky. When the low intro interest rate expires, you’ll be hit with higher interest rates. And one late or missed payment could lead to an interest rate hike overnight.
5. Borrowing from a 401(k)
Another option is to borrow against your 401(k) retirement savings. The interest rates for 401(k) loans aren’t based on your credit history, and you can repay the loan over a number of years. But you could jeopardize your future retirement or face penalties if you don’t pay the loan back within five years.
Can I save money by refinancing my timeshare?
Most borrowers refinance to get a lower interest rate to save long term, or seek a lower rate to get a lower monthly payment (or both). And lowering your interest rate on a loan can save you tons of money in the long run.
For example, let’s say you had a 15% interest rate on a $20,000 five-year loan (most timeshares have a term around five to ten years). That’s a monthly payment around $476 and about $8,548 in total interest charges over the loan term.
If you were to lower the rate on that loan to 8%, that would lower your payment to around $406 and reduce your total interest charges to about $4,332. That’s a total savings of $4,216 over the course of the loan — and a $70 cheaper monthly payment.
A word of caution: Refinancing can also give you the ability to lengthen your loan term. The longer your loan term, the more time interest charges can accrue. If your only motivation in refinancing is to get a lower monthly payment, getting a longer loan term can achieve that goal, but you’ll pay more overall if the rate stays the same.
6 alternatives to a timeshare refinance
Timeshares are legally binding purchases. If you don’t want your timeshare anymore but refinancing doesn’t seem to fit your situation, your options may be:
- Rescind your purchase. If you just bought your timeshare, you might be able to cancel the purchase — but you’ll need to move quickly. The rescission period varies between states but is usually between three to 15 days. You have a right to cancel, so your seller can’t ask or require you to give up the right by signing a waiver. To rescind and get a refund, write a letter to the homeowners association.
- Sell it back to the resort. If you want to get rid of your timeshare, your first step is to speak to the resort directly. Many major resort brands have exit programs or the ‘right to first refusal,’ which means they have first dibs on selling or buying back the timeshare. They may already have potential buyers or be interested in buying back the timeshare.
- Resell your timeshare. If the resort won’t buy back your timeshare, be prepared for offers that are a fraction of the original purchase price. The secondary market for timeshares is huge and oversaturated, so you may need to be patient or cover closing costs and maintenance fees to push through a sale. You could negotiate with the original owner, too. For example, they might release you from the timeshare if you agree to cough up a few years’ worth of maintenance fees.
- Collect points for future travel. At some top resorts, developers offer you the chance to trade your timeshare for rewards points. This is an incentive to stay inside the resort system. If you transfer ownership to someone outside the brand, you won’t be privy to those rewards.
- Consider a timeshare exchange. If you’ve paid off your debt, you might be able to trade in your timeshare for another one in a different location. The Association of Vacation Owners has a list of preferred exchange companies on its website. Keep in mind that off-peak season timeshares and timeshares in less popular destinations may be difficult to exchange.
- Engage a timeshare exit company. Think of this as a last resort. If you can’t sell your timeshare and the resort won’t take it back, you could hire specialized lawyers to do the legwork for you. These companies are controversial, and their services are expensive. It could cost you up to $5,000 to exit the timeshare. If you have years of maintenance fees and monthly payments ahead of you, the financial hit may be worth it.
Pros and cons of timeshare refinancing
There are some risks to consider before refinancing your timeshare — but the pros may outweigh the cons if you have good credit.
Pros
- Could save you money. If you have good credit, you may qualify for a lower interest rate on the timeshare and save over the life of the loan.
- More favorable terms overall. Refinancing gives you the opportunity to change monthly due dates, get a lower interest rate, smaller payment, or work with a lender that’s better suited to your situation overall.
- Earlier payoff. If you qualify for a lower rate and get a smaller monthly payment, you may be able to afford to pay off the timeshare faster and save more money.
Cons
- Bad credit can make it hard. Timeshare refinancing lenders may be hard to come by, especially with less-than-perfect credit.
- More fees. You may have to pay origination fees when you refinance, which can vary anywhere from 1% to 10%, depending on the lender.
- Some methods risky. If you use a HELOC to refinance your timeshare, your home is now collateral, which is pretty risky. Other methods, like personal loans and credit cards, carry the risk of mismanagement and falling into more debt.
Bottom line
Timeshares are tricky, and unlike most real estate purchases, they don’t build up equity. If your rates are sky-high, you could refinance down to a better rate with a specialized lender, home equity line of credit, personal loan or credit card.
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