What Are Timeshares (And Are They Worth It)?
Buying a timeshare is more than just a stuffy boardroom meeting and an afternoon of sales pitches accompanied by free lunch – it can be a dedicated and reliable vacation spot for you and your family to create memories year after year.
If you’re a creature of habit and want a dedicated vacation spot every year, you may want to consider buying a timeshare. Continue reading to learn everything you need to know about purchasing a timeshare, the different types of timeshare contracts and the costs that come along with them.
What Is A Timeshare?
A timeshare is a shared piece of vacation real estate that allows multiple owners to share the same property in different time increments. Typically, timeshare owners will stay at a property for a one-week interval each year.
If you’re unable to buy a vacation home due to financial restrictions, a timeshare may be a cost-effective solution. These properties can give you the feeling of ownership while sharing the exclusive use of a property with others during their allotted time.
While the most popular timeshares are condos or apartments located on resort properties, the shared ownership model may also apply to other properties like:
- Luxury campsites
- Single-family homes
- Lodges
- Yurts
Whether you desire a luxury mountain resort or want somewhere more remote for your yearly escape, you probably still have questions. Keep reading to see exactly how timeshares work.
How Do Timeshares Work?
Since timeshares are a shared ownership property, you enter a contractual agreement to share the property with other owners throughout the year. However, you will only have exclusive access to the property for a specific period of time out of every year.
How To Buy A Timeshare
There are various methods you can take when you’re looking into purchasing a timeshare:
- Timeshare presentations: You may attend a timeshare meeting while vacationing at a resort. In these meetings, you will hear a pitch, the benefits, tours and details of the timeshare contract.
- Timeshare reseller website: With this method of buying a timeshare, you will purchase somebody else out of their contract. This is a reliable method but you will not be able to see the timeshare in person before purchasing, so it’s less recommended.
Types Of Timeshare Ownership
Before registering for a timeshare agreement, it's crucial that you know there are two types: shared deeded timeshares and shared leased timeshares. Depending on if you or a property management company holds the deed, you may face some limitations in your timeshare contract.
Shared Deeded Timeshares
When you obtain a deeded timeshare ownership, you will own a portion or percentage of the timeshare property, meaning there is no contractual expiration date. This means that if the developer goes bankrupt, you will still own your portion of the resort.
In addition, you will have voting rights on important topics such as maintenance fees. However, deeded timeshare owners are responsible for the upkeep of the shared space. This can include housekeeping, landscaping, repairs and improvements to the property.
Another perk of deeded timeshares is they are transferable, so you can sell them, include them in your will or give them away.
Shared Leased Timeshares
A leased timeshare, also known as a right-to-use timeshare, indicates that you don’t own the property, but you have the right to physically stay at the property for some time.
Unlike deeded timeshares, the person who sells you the right-to-use agreement owns the property. Leased timeshare contracts define how long you can use the timeshare – usually these are long-term contracts. Leased timeshare agreements can expire upwards of 20 years.
Since you don’t own property in this type of ownership, you won’t have any say in annual timeshare fees and if the property owner decides to raise them. The rules of the property and the maintenance and operations are all factors completely up to the developer. Additionally, if the developer ever goes bankrupt, you would lose your ability to stay at the property.
Types Of Timeshare Contracts
Whether you enter into a timeshare contract or a purchase agreement, it’s always important to read the fine print whenever you acquire property. There are several different kinds of timeshares, and your decision will come down to the best fit for you. This will depend on your flexibility in planning or the desire to stay at different locations.
Fixed-Week Contracts
A fixed-week timeshare gives you the ability to exclusively use the property for a specified week every single year. You should look into a fixed-week timeshare contract if you like structure in planning your annual vacations since you’ll have a dedicated annual vacation spot.
However, fixed-week contracts also bring a lot of challenges. If you want to change your fixed week, for example, you might face difficulties. With this in mind, if you want more flexibility in scheduling your timeshare vacation, this contract might not be the best fit.
Floating Week Contracts
A floating week timeshare contract allows you to select the week you prefer to stay at the property during a predetermined time. Despite this type of agreement being more flexible than the fixed week, it’s more competitive.
For example, if you want to reserve a timeshare in a busy week out of the year, you’ll face the possibility of losing that week to another timeshare owner.
It’s also important to know that timeshare contracts for high-demand seasons cost more – affecting the price of your floating week contract.
Points-Based Contracts
Timeshare companies may offer a points-based system where you receive a certain number of points. You will use these points toward vacationing at the home resort or other resorts within the brand's network. This is the most popular timeshare contract system today.
The number of points you pay for a destination relies on several factors like the timeshare location and its availability, so expect to use most of your points if you prefer to stay at a popular vacation home location.
This type of timeshare agreement appeals to those who like variety instead of staying at the same vacation property every year.
Fractional Contracts
Fractional timeshare ownership is a lot like signing up for a fixed-week contract, but instead of choosing to stay at the property for only one week out of the year, a fractional timeshare lets you stay at the property for long periods of time.
This type of timeshare contract is a lot like owning a rental property, in that you are responsible for maintaining the property and ensuring that everything runs smoothly for the other owners.
Third-Party Timeshare Exchange
For many people who purchase a timeshare, one benefit is getting to vacation in the same spot every year. However, for those who are more adventurous, they can enter timeshare vacation exchange programs to swap timeshares with other qualified owners.
Although this typically requires a fixed-week timeshare contract, you may enter a third-party timeshare sharing program to make this exchange and vacation somewhere new every year.
Upfront Timeshare Fees
The more desirable a location and time of year of the rental, the more costly the timeshare. With this in mind, upfront timeshare costs vary.
You may choose to pay for the entire timeshare interval upfront or opt for financing options to pay off your contract in monthly installments. This option is convenient for timeshare owners who aren’t prepared to pay the upfront cost all in one go.
According to the American Resort Development Association (ARDA), the average cost for a timeshare interval was $24,140 in 2021.
Timeshare Maintenance Fees
When you enter a contract for a timeshare, you will owe the managing property an annual maintenance fee to help maintain the property. These fees typically cost timeshare owners up to $1,000. These fees generally increase every year, and you might have to pay an additional assessment for unexpected repairs.
Timeshare maintenance fees cover:
- Regular upkeep and maintenance
- Yard work services
- Gym upkeep
- Pool repair and maintenance
- Sprinkler repair
- Landscaping work
- Golf course care
Timeshare Interest Rates
Much like when you buy a new home, there are interest rates you need to consider. This typically depends on the state of the market at the time you sign your contract.
Typically, interest rates for timeshares are steep: They may reach up to 20%. On the same note, keep a close eye on your timeshare loan calculations. The upfront fees and down payment are the only things to finance – you should never finance maintenance fees.
Timeshare Property Taxes
Depending on your contract, your timeshare may hit you with annual property taxes. Most of the time, however, they will be lumped together with your upfront fees or bundled with your maintenance costs.
Buying Vs. Renting A Timeshare
If you’re wondering if you should buy or rent a timeshare, it all comes down to your commitment level.
If a timeshare sounds like a great idea, research or consult with a timeshare agent to buy one. However, there are other options available, such as renting a vacation home or purchasing a second house.
If you’re just starting to dip your toes into timeshares, it might be best to try renting out a few vacation properties on third-party websites. Then, if you really want to return to the same destination year after year, opt for purchasing a timeshare and entering a timeshare contract.
Pros And Cons Of Timeshares
Timeshare owners agree that there are advantages and disadvantages of timeshares. It’s important to do your research on timeshares to determine if they’re worth it to you.
While you’re deciding, it’s important to grasp that timeshares are only vacation destinations and not a source for investments. Don’t expect a return on your purchase.
Check out our list of timeshare pros and cons below.
Pros of Timeshares
Timeshares ensure that you own your vacation spot instead of renting it, which guarantees your stay and helps you save on future trips.
Most timeshares have a floor plan like two-bedroom condominiums or apartments. The advantages of timeshares include things like:
- Guaranteed vacations
- Long-term savings
- Dedicated space and amenities
- No year-round maintenance
- Luxurious accommodations
- Rent to others
Cons of Timeshares
All in all, timeshares have a bad reputation caused by high-pressure marketing tactics and dishonesty. Commonly, maintenance fees will increase over a yearly basis, which might not be brought to the attention of potential buyers.
Some disadvantages of timeshares include:
- Annual maintenance fees and dues
- High upfront cost
- Hard to sell
- Misinformation from third-party sellers
Timeshare FAQs
Do I Have to Pay for a Timeshare Upfront?
Yes, you typically have to purchase a timeshare upfront, but there are financing options available for most purchasers.
Can I Get Out of a Timeshare Contract?
You can get out of a timeshare contract in the following ways:
- Sell it to an interested buyer
- Give it away to a friend or family member
- Ask the property about exiting your timeshare
- Rent your timeshare on vacation rental websites to cover the cost
What Are the Most Popular Timeshare Destinations?
According to Timeshare Broker Associates, the top timeshare destinations in the United States are:
- Disney resorts
- Myrtle Beach
- Hawaii
- Lake Tahoe
- Branson
- Williamsburg
- Las Vegas
Are Timeshares Worth It?
When deciding if a timeshare is financially worth it, you need to factor in the upfront cost and yearly maintenance fees and determine the number of years you plan on vacationing at that destination.
The Bottom Line
Now that you know how to buy or rent a timeshare, as well as the pros and cons of fractional ownership, use Quicken Loans® to learn everything you need to know about home buying and potential financing.
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Victoria Araj
Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.