Vacation Ownership Financing: What Your Customers Need to Know
The timeshare market is expected to remain lucrative in the next few years. It’s estimated that by 2023, the market will experience a 7.05% growth, meaning that businesses that specialize in this sector still have plenty of time to maximize their profits. This also means that the banks that offer vacation ownership financial products can expect to see more customers who need financing options for their timeshares for the foreseeable future.
Managing financial products that are tied to vacation ownership, however, is a lengthy and complicated affair. The task involves keeping tabs on customer payments over several years, tracking usage and trades between timeshare owners, and billing the owners for property maintenance, among many other demanding activities. It’s imperative, then, for banks that offer financial products to timeshare customers to have a digital lending solution that will let them handle these transactions with relative ease. Having access to a smart asset management, billing, and payments solution allows banks to assure timeshare holders that they’ll be able to experience smooth transactions from the moment they sign up for ownership until they complete their financial obligations.
Now, retail customers who want to use financial products that are specifically designed for vacation ownership may have a few questions that they want to raise with their banks. While it’s highly likely that they’ve discussed these questions with their respective agents and developers, it’s also possible that they’re looking for an unbiased opinion from a third party. Here are some of the common questions retail customers have about vacation ownership:
Owning a timeshare or vacation ownership means owning the right to use a particular place for a set amount of time or owning a portion of the said property. Owning rights to a property, however, does not mean that a timeshare owner can modify the property’s lease terms, allow other people to rent the place, or sell it outright. In comparison, if a person owns a piece of real estate, then they can lease or sell their property to other people as they see fit.
- Shared Deed Ownership – When a timeshare owner signs up for shared deed ownership, this means that they purchased a percentage of the real property itself, and they’re sharing the property with other people. The deed for the percentage of the property includes the exact dates when a particular property owner can use the space. For example, if a condo unit is sold to 52 owners, then each owner gets to use the property for 1 week every year. Typically, in this arrangement, it’s possible to sell or transfer the timeshare owner’s deed to another person. Vacation ownerships that are offered through shared deed ownership are often more expensive compared to leased ownership.
- Shared Lease Ownership Interest – The developer of the property retains the deeded title in a shared lease ownership interest. What the timeshare owner buys into is a lease that allows them to use the space for a particular amount of time, with no set date. Properties under lease ownership cannot be transferred to another person, and as such, are cheaper than properties under a shared deed.
The value of a timeshare property is tied to the demand for the properties in the location. For example, if many people are willing to pay extra to spend more time on a property, then the property’s price goes up. If renters or buyers are scarce or if a new timeshare property is being built in the area, then the price of the unit goes down. It’s best to consider timeshares as a luxury item because they depreciate in value when the economy is down and not a lot of people are taking vacations. In many arrangements, it’s not even an option to sell a timeshare owner’s lease to other people.
What Other Expenses Come with Buying Vacation Ownerships?
In some cases, companies that sell timeshares highlight the price of ‘buying’ the timeshare while downplaying the yearly or monthly cost of maintaining the property. Prospective buyers need to be aware that on top of the base cost of their timeshare, they also need to pay maintenance and membership fees. In addition, they should also consider finance charges and service charges from the bank. This way, they won’t be surprised when they get the bill.
Timeshares can be a great option for people with disposable income who are looking for ways to simplify their vacation options and who never want to worry about accommodation at their favorite vacation spots again. At the same time, though, owning a timeshare is a financial responsibility that can last for many years. Banks that offer timeshare financing products need to be able to screen their customers well and make sure that they know what they’re signing up for. This way, both the bank and the customer will be able to enjoy smooth and mutually beneficial transactions throughout their engagement.