Financing options

[MASnyder]

Hi everyone!
I am new on this board, and recently purchased a timeshare through Marriott at Myrtle Beach. We are very excited, although I wish we would have done more research like purchasing through broker or owner, as opposed to purchasing through Marriott.

Anyway, on to my question. We obviously did the financing through Marriott. 10 year loan, $21,000. We have the "loan" put on our Marriott Visa for the extra points (I think it is 3 points per dollar) and they give us extra points for doing it that way, although I cannot remember how may. Anyway, would we be better off just using our home equity line of credit, so we can deduct the interest on the line of credit? My friend at the bank said she is looking into if the timeshare would be a secured loan or unsecured.

Thanks for your input.

Mark

 

[johnmfaeth]

Fropm a pure cost of money perspective, a HELOC is the cheapest method of financing any monies owed. Timeshares are traditionally financed through the developer as unsecured personal loans and that is what a bank will do too. This results in a 12-18% interest rate if refinanced that way through a bank.

Some will argue that you should never put your house "at risk" by financing a timeshare purchase on a HELOC. But it's too late, you already bought it. If you default on the curreent high interest loan, your credit will eventually be slapped with a judgement anyway, so save the 10% interest differential is my opinion.

Don't know when you bought this but if within the past 3-14 days, rescind immediately and go resale (varies by state).

 

[MASnyder]

Thanks for the quick response. We put the "loan" on our credit card, so unless we default on the card, we will not default on the loan. We just need to be disciplined to pay the card off every month with the $330 payment. I was just trying to see if we could get the payment down lower.

Thanks for your input!! Looks like I might just stay put.

 

[johnmfaeth]

Hi Again,

I may have confused a little with discusing how banks view it if refinanced as a NEW bank loan (not your HELOC).

You can use your HELOC for anything. At about 7% interest, I personally would definitely use that to pay off the loan. which is probably at 16%+ through the Marriott card.

I was merely pointing out that others may disagree with me. but that's a lot of interest saved over the years. Theoretically, makes you further away from defaulting.

 

[Dave M]

I agree with John 100%.

If you take the full 10-year period to pay off the loan, using a home equity loan instead of the Marriott loan would save you about $10,000 in interest expense over the life of the loan, before considering income tax implications!

 

[thinze3]

You probably received a couple of MR points bonuses with your purchase.

One of them is for Marriott financing, usually 150,00 for an annual purchase and 75,000 for an every other year purchase.

You will not receive this MR points bonus if you pay off your loan before 3 months has expired! So, I advise you to keep the (probably 13.99%) Marriott loan for FOUR months, and then use your HELOC to pay off the loan.

Terry

 

[mcmartymc]

Shop around for home equity loans, I just received an offer from my credit union for 5.99%, you can invest your money in a cd for almost 5% now, the money is only costing you 1%, plus the interest is tax deductible.

 

[m61376]

As Terry pointed out, Marriott has been tying those reward point incentives to keeping their loan for at least 3 months. However, unless things have changed, you can prepay the bulk of the loan and just leave a minimum payment left for month 3; you can call them and clarify how much you would have to leave through the third month to qualify for those points.

While the 3-month loan for promotional points is a wothwhile incentive, keeping the loan for additional points (if they offerred you that deal) is NOT worth paying the huge financing premium. That extra savings from those high finance charges will pay for a lot of years of airfare, etc.- save the money and use a home equity loan, which is tax-deductible.

Even though getting the logistics worked out may be a little frustrating right now, it is worth it and look forward to enjoying your purchase- congrats!

 

[Beverley]

Just an FYI, I believe the loan with Marriott can be deducted as a mortgage, however, it is much cheaper to use the line of credit.

Beverley

 

[winger]

Don't let those carrots of 50,000 MRP each 6 months you keep the Marriott Loan balance > $0 sway you. I believe that was the deal last Fall when I attended a Marriott tour. I agree it is good to just keep the balance until the 3 mo's are up then pay it off.

 

[MULTIZ321]

Here's a link to a mini-tutorial on HELOC Loans


Richard

 

[MASnyder]

Thanks to all who responded. We will do some research!!

 

[dioxide45]

With the recent credit crunch, it will get harder and harder to obtain home equity loans, cash out options to pay off bills will be harder to qualify for. Many mortgage companies and banks have stopped offering HELOC and home equity loan products because they can't find investors for the loans. With no one to invest in your 2nd mortgage loan, they can't orignate them, thus the reason many banks are limiting their offerings.

 

[drmanny]

i have a loan with marriott @12.49% with a monthly payment of $535
I pay with Marriott visa, suppose to get 5 MR points perdollar and plus 2 MR bonus points so 7 MR points per dollar.
They will give 25000 MR points every six months
Thus i could collect ~92000 MR points/year or should i get a home equity @7%

i have Barony Beach 2 BR Platinum and convert 125000 x 2 every year for a grand total of 340,000 points.

Am i too caught with points.....or i can use the points to see world with my wife

 

[pacheco18]

You probably received a couple of MR points bonuses with your purchase.

One of them is for Marriott financing, usually 150,00 for an annual purchase and 75,000 for an every other year purchase.

You will not receive this MR points bonus if you pay off your loan before 3 months has expired! So, I advise you to keep the (probably 13.99%) Marriott loan for FOUR months, and then use your HELOC to pay off the loan.

Terry

I don't think that's true -- at least it wasn't a few years back. We "financed" just to get the incentive points and then paid it off upon receipt of the first request for payment. All we had to do was make 3 payments and we were allowed to write 3 separate checks and mail them in all at once.

 

[Dave M]

drmanny -

The most common valuation placed on Marriott Rewards points is about one cent each. Some people assign higher valuations, but those higher valuations usually assume no discounting for loss of use of the cost of the points until they are redeemed and often assume that the person would actually pay for business class or first class plane tickets, something most of us would not do.

At one cent per point, your 92,000 points would be worth about $920. However, the difference in interest costs on your Marriott loan and a home equity loan are about $2,000 this year, assuming a loan amount of about $37,000. (That's the amount I roughly calculated, based on a ten-year loan at 12.49% and a monthly payment of $535.) Even after tax considerations, the cost of those points is still more than they are probably worth.

It's for that reason that the most frequent advice is as contained in this thread - get the Marriott loan to start with in order to get the front-end incentive points, make the minimum required payments (usually for three monthly payments) to retain those incentive points and then pay off the loan or convert it to a home equity loan.

 

[drmanny]

thanks,
does make sense and even if i did get HELOC , i could just pay it off in 3 -4 months on Marriott visa and pay off visa with HELOC and still get the points
Thanks again

 

[MASnyder]

Dave, I like your advice!!

 

[thinze3]

.........It's for that reason that the most frequent advice is as contained in this thread - get the Marriott loan to start with in order to get the front-end incentive points, make the minimum required payments (usually for three monthly payments) to retain those incentive points and then pay off the loan or convert it to a home equity loan.

Maybe you can even be creative and pay off the Marriott loan with your Marriott credit card (up to the limit) to get the 5-7 MR points per dollar. You can then follow that up by paying off your Marriott credit card with your HELOC.

This could net you up to another 100K MR points!!