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How Timeshare Financing Works for Vacation Property

By Austin Kilham · September 16, 2021 · 5 minute read

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How Timeshare Financing Works for Vacation Property

Dreaming of swaying palm trees and fruity drinks topped with tiny turquoise umbrellas, or escaping to a ski villa up in the mountains? While many of us would love to own a vacation home in our favorite destination, the expense is not always feasible. Because we can’t all own multiple properties, vacation timeshares continue to be a popular choice for solo travelers, couples, and families who want more space, amenities, and “a place to call home” at their locale of choice. Here’s a look at what timeshares are and some timeshare financing options.

What Is a Timeshare?

A timeshare is a way for multiple unrelated owners to own a fractional share of a vacation property, which they take turns using. They share costs, which can make timeshares far cheaper than buying a vacation home of one’s own.

Timeshares are a popular way to vacation. In fact, 9.9 million U.S. households own a timeshare, according to the American Resort Development Association (ARDA). The average price of a timeshare in the United States is $22,942 . Though this figure can vary widely depending on the location, the size and quality of the property, the length of stay, time of year, and the rules of the contract.

How Do Timeshares Work?

Timeshares usually fall into two broad categories: deeded or non-deeded. With a deeded ownership structure, each owner owns a piece of the property, which is tied to the amount of time they can spend there. The partial owner receives a deed for the property that tells them when they are allowed to use it. For example, a property that sells timeshares in one-week increments, would have 52 deeds, one for each week of the year.

Non-deeded timeshares work on a leasing system, where the developer remains the owner of the property. You can lease a property for a set period during the year, or a floating period that allows you greater flexibility in choosing when to use the property. Your lease will expire after a predetermined leasing period.

Timeshares may also offer one of a handful of options for timeshare use periods. They may be fixed-week, meaning you can use the property during a set week each year. There may be floating weeks which allow you to choose when you use the property depending on availability. A timeshare may offer fractional periods that allow you to use the property for a longer period. And finally, you may be able to purchase points that you can use in different timeshare locations at various times of the year.

Choosing a Timeshare

When you purchase a timeshare, you’re sharing the property with a number of other timeshare owners and you typically have the right to use the property at the same time every year.

You can trade days with other owners and sometimes even try out other properties around the country (or around the world) in a trade. In addition to the initial purchase price, you’ll also be required to pay your share of the maintenance fees that cover the costs of property upkeep and cleaning. These maintenance fees often increase over time with hikes in cost of living. There are also service charges that timeshare owners may have to pay, such as fees due at booking.

Once you’ve considered the financial responsibilities that come with the timeshare and your budget, choosing the right place often comes down to where you want to be and what you need in terms of space and amenities.

Are Timeshares a Good Investment?

Getting out of a timeshare can be difficult. Selling sometimes involves a financial loss, which means they are not necessarily a good investment. However, if you purchase a timeshare in a place that your family will want to return to for a long time—and can easily get to—you may end up spending less than you would if you were to purchase a vacation home.

Financing a Timeshare

When you buy a home, you typically finance it with a mortgage. When you buy a car, you can finance it with an auto loan. But timeshare financing has no direct market. The developer of the resort may offer you financing, but beware: these offers often come with very high interest rates, especially for buyers with lower credit scores. In fact, ARDA reports that the average interest rate on a timeshare financing loan is 14% over 10 years, with rates reaching as high as 20%.

Developer financing is often proposed as the only timeshare financing option, especially if you buy while you’re on vacation. However, with a little advance planning, there are alternative options for financing timeshares. If developer financing is taken as an initial timeshare financing option, some timeshare owners may want to consider timeshare refinance in the future.

Home Equity Loan

If you have equity built up in your primary home, it may be possible for you to obtain a home equity loan from a private lender to purchase a timeshare. Home equity loans are typically used for expenses or investments that will improve the resale value of your primary residence, but they can be used for timeshare financing as well.

Because a home equity loan uses your house as collateral, it is likely that you will be given a lower interest rate compared to the rate on a timeshare loan offered at a developer pitch. Additionally, the interest you pay on a home equity loan for a timeshare purchase may be tax-deductible as long as the timeshare meets IRS requirements, in addition to other factors. Before using a home equity loan as timeshare financing, or even to refinance timeshares, be aware of the risk you are taking on. If you fail to pay back your loan, your lender may seize your house to recoup their losses.

Personal Loan

Another option to consider for timeshare financing is obtaining a personal loan or vacation loan from a bank or an online lender. While interest rates for personal loans can be higher than rates for home equity loans, you’ll likely find a loan with a lower rate than those offered by the timeshare sales agent.

Additionally, with an unsecured personal loan as an option for timeshare financing, your primary residence is not at risk in the event of default, and securing an unsecured personal loan is generally a simpler process than qualifying for a home equity loan. Online lenders, in particular, offer competitive rates for personal loans and are streamlining the process as much as possible.

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The Takeaway

Timeshares are often thought of as a way to guarantee vacation time in your favorite location each year without having to buy a second home. If you do your homework and weigh the risks, they can be a good way to vacation with family and friends and make a lot of memories along the way.

Thinking about using a personal loan for timeshare financing? Check out SoFi to check your rate in just a few minutes.


Can I rent my timeshare to someone else?

Whether or not you can rent your timeshare out to others will depend on your timeshare agreement. But in many cases your timeshare resort will allow you to rent out your allotted time at the property.

Can I sell my timeshare?

Your timeshare agreement will give you details about when and how you can sell your timeshare. In most cases, you should be able to sell, but it may be hard to do so, and you may take a financial loss.

Can I transfer ownership of my timeshare or leave it to my heirs?

You can leave ownership of a timeshare to your heirs when you die and even transfer ownership as a gift while you’re living. Once again, refer to your timeshare agreement for rules about what is possible and how to carry out a transfer.

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