Are timeshares worth it? How to decide if buying one is right for you

Nearly 10 million American families own a timeshare, a unique kind of vacation home that is shared with others. Timeshares let people return to the same vacation spot every year without having to find accommodations, but they don’t have the same benefits of a second home or privately owned vacation home. You might be wondering if one is right for you and your situation.                                     

While Rocket Mortgage^® doesn’t finance timeshares, we know many people are curious about these vacation homes, so let’s delve into all the details you need to consider when buying a timeshare.

Key takeaways:

• A timeshare is an arrangement by which multiple individuals share a property or the right to use one.
• Timeshares can be a good option for those who like going to the same vacation spot at the same time every year and don’t want the hassle of planning trips.
• Timeshares have a number of drawbacks in initial and ongoing costs, limited usage, and issues with depreciation and resale options.

Timeshare basics

Many people have heard of timeshares, but they may not know exactly what one is or how they work. Let’s cover some basics:

• What is a timeshare?: A timeshare is an arrangement in which two or more people share the right to use a property. They may share ownership or may lease it from the property owner.
• How a timeshare works: Usually a timeshare involves each tenant using the vacation property at different times of the year. However, recently some major hotel chains have vacation or timeshare clubs. They offer points that can be spent at various properties in different destinations, providing more flexibility.
• The cost of a timeshare: It’s difficult to give an average cost of a timeshare given how widely costs range based on a variety of factors. However, the 2024 report from the American Resort Development Association shows that the average price of a timeshare transaction in 2023 was $24,170. The average nightly rental rate was $242.

Benefits of timeshares

Timeshares offer plenty of benefits. Here are a few:

They can be difficult to cancel:

Timeshares are known for being difficult to cancel, with many tenants finding themselves with a lifelong burden. Read your timeshare contract and understand how to cancel your ownership or sell your timeshare. Sometimes, you might be able to sell your interest or even sell the timeshare back to a company. But it’s not usually so easy.

They can’t be used just anytime: Because you’re sharing the property with others, you can’t generally just show up whenever you want. And the time you’re allowed to be there might be very short, usually only one week. Some timeshares require you to stay the same week or two every year, while others let you go anytime within a certain period.

They can be expensive: Timeshares are pricey. You’ll have to pay a large upfront fee to secure your share of the timeshare or membership in the club. You’ll also have to pay for annual maintenance and other fees, which can significantly increase every year.

They depreciate in value: If you own a vacation home and you maintain it properly, the property will likely increase in value over time, or at least not significantly decrease. On the other hand, timeshares depreciate rapidly, with many ultimately being valued at 0% – 10% of the original value.

They can be difficult to resell: Timeshares can be considered a niche real estate market. They appeal to a very specific kind of buyer, and finding them can be difficult, especially in an oversaturated market. This means reselling your timeshare is a tough endeavor. Many people fall for resale scams because they can’t find a seller on their own.

Scams are possible: As we just mentioned, scams are unfortunately pretty common when it comes to the timeshare market. This is for both buying and selling, leaving people on the hook with high expenses. While not all timeshare sales professionals are being dishonest, be sure to exercise caution. This is especially true when trying to sell yours, as many services claim to be able find a seller quickly, then trick the tenant into paying high fees.

How to decide if a timeshare is worth it for you

Now that we’ve covered some of the advantages and disadvantages, maybe you’re wondering how you decide if a timeshare is right for you.

1. Weigh the benefits and risks

Are any of these benefits deal sealers for you, or are any of the downsides deal breakers?

2. Learn about the different types of timeshares

Not all timeshares are the same, so here are the three most common types:

• Fixed-week: When you have fixed usage weeks, you go to the destination at the same time every year.
• Floating-week: With floating week usage, you can book your timeshare any time someone else isn’t using it.
• Points system: A points system lets you use points to pick different destinations to visit instead of going to the same place all the time.

All of these appeal to different people and lifestyles, so consider what would work best for your plans. Maybe you’d like some flexibility because of your job, or maybe you know you’re always free at the same time due to family schedules.

3. Understand deeded and leased timeshare ownership

Besides different kinds of timeshares, there are different kinds of ownership:

• Deeded: If ownership is deeded to you, you have ownership rights in the timeshare. You and the other owners, who you might not personally know, are typically tenants-in-common.
• Leased: If the timeshare is leased, you’re purchasing access rights to the property in a right-to-use agreement. The person or company you bought it from owns the property.

A deed timeshare means you might have more freedom with what to do with the property, and it might be easier to end the lease. On the other hand, you have a greater stake in a property that others live in most of the year.

4. Consider how you’ll finance the timeshare

Because you aren’t fully buying a property, you can’t finance a timeshare with a traditional mortgage. You’ll have to consider alternative financing such as cash, credit cards, or personal loans. Unless you’re paying cash, you might find yourself financing a hefty purchase with a very high interest rate. Some loan companies specialize in financing for timeshares and some larger hotel and resort brands offer financing as well.

5. Think about how much time you’ll spend at the timeshare

Because timeshares limit how often you can visit, and the time allowed is often very short, you want to make sure you’ll be taking advantage of it at every opportunity. Given the significant costs of timeshares upfront and annually, maximizing your fun there is important to make it a worthwhile purchase. Consider calculating an estimated per night average.

6. Consider alternatives

As always, you want to think of alternatives before making a big purchase. Maybe you’ll decide that the flexibility of regular hotels and other nightly accommodations works better for your lifestyle. Or you decide that if you’re going to spend the money, you want to take the plunge and buy a vacation home outright. You could also consider going in on one together with a friend or family member who can share the property with you.

7. Consult an attorney or financial advisor

If you find yourself seriously considering a timeshare, have an attorney and/or financial advisor review the terms of the contract. They’ll help you understand the rules, fees, and exit options while you decide if it’s a smart financial move for your situation.

When is a timeshare worth it?

A timeshare might be the right option for you if:

• You like going to the same place or places every year.
• You usually take vacation at the same time every year and only spend a week or two.
• You don’t want the hassle of finding accommodations when on vacation.
• You don’t want to think about the maintenance of owning a vacation home.

When isn’t a timeshare worth it?

A timeshare might not make sense for you if:

• You don’t want to go to the same place or places every year.
• You don’t want to go on vacation at the same time every year or want longer vacations.
• You’re worried about depreciation and resale value.
• You’re concerned about the upfront costs.
• You think you might eventually want your own vacation property.

The bottom line: Only you know if a timeshare is right for you

A timeshare is a bit like a turnkey vacation. You’ll have the right to use a property for a certain amount of time a year, while others will stay there the rest of the time. Though many timeshares are for a specific property, some hotel chains now offer point systems to give people a variety of timeshares to use in different regions. There are benefits and drawbacks alike, and as with any significant purchase, it’s important to consider all options.

If you think you’d rather buy a vacation property of your own to use whenever you’d like and resell when you’re ready, start an application today.