couple at a timeshare
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It can be hard to resist the idea of owning beachfront property that you can use for a week every year. Timeshare salespeople know this, and often make a hard sell about the money you can save with a timeshare instead of booking vacations each year.

Before buying a timeshare, research  the pros and cons of this form of vacation home ownership. Here’s what you need to know about how a timeshare works.

How does a timeshare work?

A timeshare allows you to vacation for a week or more at a specific property that is shared by multiple people. In some timeshare agreements, each person owns a fraction of the property, based on how much time they plan to use it. In other cases, each person simply leases the property for a period of time—usually for at least 20 years—without actually owning it.

However, unlike other property ownership, timeshares typically will not appreciate in value, thanks to the volume of used timeshares on the market. Instead of viewing a timeshare as an investment, think of it as you would other vacations—as leisure spending.

Is a timeshare right for me?

A timeshare can offer the perks of owning a vacation home at a fraction of the cost: You only pay for the time you use—as well as any associated maintenance fees. The average cost of a new timeshare is around $20,000, while maintenance fees typically run around $660 per year.

These characteristics can make timeshare ownership a good option for people who like to vacation in the same place each year, and who have the means to finance the purchase upfront. Most banks will not lend money for a timeshare purchase because they tend to lose value. Developers of timeshare properties may offer financing, but usually at much higher interest rates than a bank. If you are not in a position to purchase a timeshare with savings, you probably shouldn’t buy one.

Personal loans are a great way to buy a timeshare. Check out our your personal loan options here.

There are other downsides to timeshare ownership to consider. For starters, the resale market is crowded with other owners trying to sell their used timeshares. This competition means that timeshare owners who eventually decide to sell will probably incur a loss. What’s more, the Internal Revenue Service (IRS) does not allow you to claim a capital loss from a timeshare, as you would with other investments.

What are the different kinds of timeshares?

Timeshare options generally fall into two broad categories:

  • Deeded: A deeded timeshare is one in which you purchase ownership interest in the property. Each owner is granted a percentage of the property itself.
  • Non-deeded: A non-deeded timeshare is one in which you purchase a lease or license to use the property for a set number of years, but do not actually gain ownership interest in the property.

A non-deeded timeshare can cost less than a comparable deeded timeshare. But non-deeded timeshares often have more stringent limitations on the transfer of property than deeded timeshares do, which makes resale more difficult.

Next, there are various options covering timeshare use periods:

  • Fixed week: Gives you access to a specific property the same week each year.
  • Floating: Gives you the flexibility to use your property at any time, according to the unit’s availability.
  • Flex-time: Allows you to choose a specific season in which you may use your timeshare week.

You’ve decided to buy—now what?

If you determine that purchasing a timeshare complements your lifestyle and is financially viable, look before you leap. Always inspect a particular unit before making a deposit, and speak to other timeshare owners. Never rush into a deal.

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