Get Out of a Timeshare and Find Down Payment Help to Buy a Home

15:23And these fees really don't decline year over year because it's one of the ways that the companies make money. And one of the other things is that that$1 ,500 to$1 ,600 average is just that. It's an average. So many people are paying more and sometimes a lot more. I did a quick look on the Timeshare owners subreddit and found someone paying$7 ,500 annually in maintenance fees on top of$2 ,000 per month for their principal and interest payment. So think about that. That's$24 ,000 per year for their principal and interest payments. And that's on top of the$7 ,500 annually that they pay in maintenance fees just for the right to potentially book a property that they contractually own for a few weeks a year.

16:06It's crazy to me.

16:07Elizabeth Ayoola:And then I'm also thinking there might be years while I would love to go on a vacation every single year, there may be years maybe I want to cut back on expenses and I don't want to go on a vacation. But if I'm part of a timeshare and I choose not to, then I'm essentially paying fees for something that I'm not using. That's absolutely right. And, you know, as somebody that travels for a living, I'm literally a travel writer. My whole thing, if you want to save money and travel for cheap, is use hotel points, use credit card rewards, use things that don't tie you into a contract that lasts forever.

16:37And they also provide a whole lot more flexibility.

16:39Elizabeth Ayoola:All right. So we've talked about what timeshares are. We've talked about fees associated. Let's get to the meat of Inca's question. How are we getting out of the timeshare? Now, when I did my own research on timeshares, I was mortified at how difficult it can be to get out of them. Craig, why is it so hard to say, hey, I don't want this timeshare anymore and I want to get rid of it and save my money? So the big players in the timeshare space know how to write contracts and they know how to write ironclad contracts. So I'll preface this by saying that I know the timeshare model works for some people.

17:11I'm not one of them, but it seems to work for some people. but generally the industry exists by selling you on a dream and trapping you with the exhausting fees and restrictions in the legally binding contract that you sign and in my opinion timeshares are the ultimate expense marketed as an asset assets make you money timeshares generally don't make you money they don't really appreciate in value because they're so illiquid and since the contracts are legally binding and can last for a lifetime they're hard to sell since most people don't want those kinds of restrictions for the rest of their lives.

17:43And if they did, they would just go and buy a timeshare outright themselves. They wouldn't be looking to purchase yours.

17:48Elizabeth Ayoola:Wow. I know this is not hopeless and Inca, we want to help you. So what are some steps that Inca's parents can take to begin to rid themselves of the timeshare? While I was reading upon options, I came across timeshare exits. And I must say, they do look a little bit like shady business, Craig. Can you explain how they work? Oh, shady business is right. So there are a few ways that you can get out of a timeshare and going through a third party is not one that I would recommend. A timeshare exit company is a third-party business that charges an upfront fee to help owners cancel their timeshare contracts.

18:22And I'm using help in air quotes for the listener. They often charge thousands of dollars or more. And the industry is generally widely known for making false guarantees that can even leave you with the timeshare after you pay their fee. So you're still on the hook for the contract after you pay thousands of dollars to try to get out of the contract. And these companies are so shady and unscrupulous that the Federal Trade Commission actually has guidance on avoiding them in order to not have to deal with the issues that have come up with those third parties. So instead of dealing with a third party, my personal recommendation and the recommendation of the Federal Trade Commission is that you simply contact the timeshare that you're under contract with and discuss exit options.

19:08Elizabeth Ayoola:Ooh, okay, this is getting bleak, but I know there's a light at the end of the tunnel, Craig. As you mentioned, if someone tried to sell me a timeshare, I don't want it. So I imagine, as you said, it's hard to resell them. Can you sell it back to the company that you bought it from? What are their other options? Oftentimes you can, and that's usually your best bet. So there's something called an exit fee associated with a lot of these contracts, where the timeshare company will buy the property back from you or buy the contract obligations back from you for a fee. These timeshare stakes are so hard to find buyers for that often people give them away for free on eBay just to get out from under them.

19:43You know, another option is that you could rent the timeshare out, but that can also be difficult. So in Inka's case, her parents own a timeshare in Orlando. There's a glut of housing and other timeshares available in Orlando. So it's going to be very, very difficult to get your money back and recoup your costs if you do try to rent it out. Another option is that you could simply stop paying your dues, but I 100 % would not recommend this to anyone. You're contractually obligated to pay these fees, but that choice could be catastrophic to your credit score if the timeshare developer or whoever your lender is decides to foreclose on you for a lack of payment.

20:20So if you go to one of these timeshare presentations like you went to in Jamaica or like that I go to regularly. If you sign a contract, most states now mandate a cool down period. And legally, that's called a rescission period. And it typically lasts for a three to 15 day period after you sign a contract, depending on the country or state that you sign in. And that allows you to cancel the contract and walk away like you had never signed it. It's sort of like a return policy from a car dealership when you buy a new car in case something happens with it in the week after you drive off the lot.

20:52And this exists to protect buyers who may have purchased a timeshare under duress caused by aggressive sales tactics. So again, these sales tactics are so unscrupulous oftentimes that there are now regulations in place to let people walk away from contracts in the weeks after they sign them.

21:11Elizabeth Ayoola:All right, Craig, I know that your article mostly talks about how to get the perks without committing, but let's talk about the pros because we've gone over a lot of cons. Elizabeth, you experienced it. Those salespeople use pretty lofty and dreamy language, don't they? They do. They do. There's a reason for that. They want you to dissociate into a dream and sign a contract while your head's in the clouds. So let me phrase it like this. At the end of the day, a timeshare could be for you if you would rather have the potential, but absolutely not a guarantee of saving a few dollars on a vacation, but be locked into visiting in the same place for a limited number of places every year.

21:51And maybe at times that you don't want to visit because the timeshare you own is already occupied or falls within blackout dates. So if you have travel flexibility and you want to return to the same place every year, some people want that. I prefer variety. If I want to go back to the same place, I'll just book it again in a few years and not have a contract. But some people want to know exactly what they're getting year in and year out and return to the same place. And that's fine. A timeshare might be for you. It works for some people. Again, I highly value flexibility and timeshares are the opposite of flexible.

22:22So they lock you into payments that increase every year, regardless of whether you use it. And that's just really not for me.

22:28Elizabeth Ayoola:I do know a few people who are very rigid in that way and like to go to the same place every year and do the same thing. So I guess you're right. It could appeal to people like that. But I mean, there are just so many other ways to travel. Yeah, exactly. And that's my biggest thing is you don't need a timeshare to travel. If you have it, maybe it gets you out of the house and you wouldn't have booked a vacation otherwise. Maybe that's for you if you want to go to the same place and you wouldn't travel otherwise. But you don't need it. You can travel without all the restrictions and with a lot more flexibility.

23:00When you buy a timeshare, you're contractually on the hook for those maintenance fees and the upfront cost. So if you don't vacation one year, you're out 100 % of that amount you paid with nothing to show for it. And beyond that, if you take out a loan for the initial buy-in, you're effectively financing future vacations. And it's no different than putting a vacation on a credit card without paying it off, which I would never recommend anybody do.

23:24Elizabeth Ayoola:Well, Craig, for people who do opt to buy into a timeshare, so maybe they've listened to this and they've said, you know what, it is for me and I still want to buy into a timeshare. What are some things that they can do to avoid being in a position where they're struggling with rising fees and underuse in the future? So rising costs are a fact of life for timeshare owners, but underuse is something that you can control by planning ahead. You can block off time on your calendar every year in advance to be sure that you use the timeshare that you're paying for. All right. Well, Craig Joseph, you have laid out the arguments for and also against.

23:55Elizabeth Ayoola:And I still say I'm against timeshares. Definitely not for me. Now, I hope that was helpful for you, Inka. Please let us know, write us and tell us what you thought. And Craig, thank you so much. Absolutely. It was a pleasure, Elizabeth.

24:10Sean Pyles:Before we get to this week's money news, we want to tell you how you can win a$250 Amazon gift card.

24:16Elizabeth Ayoola:Yes,$250. I wish I could participate. But anyway, all you have to do is take our listener survey at nerdwallet.com slash pod survey. Your answers are going to help us improve the show. And the survey is shorter than last year's.

24:29Sean Pyles:And not one, but two lucky winners will get a$250 Amazon gift card for participating. One more time, that's nerdwallet.com slash pod survey or check the link in the show notes. Stay with us for a look at what kind of help is available if you want to buy a house but don't think you can afford it. That's next.

24:51Sean Pyles:Today's episode is sponsored by Quince. You know, Elizabeth, I'm not big on trends, but I am big on clothes that feel good and last. That's why I keep going back to Quince. Their lightweight layers and high quality stables have become my everyday essentials.

25:04Elizabeth Ayoola:And actually, Quince has all the things that you want to wear this summer. It is super hot in Texas, so I appreciate the organic cotton silk polos, European linen beach shorts, and comfortable pants that work for everything from your backyard hangouts to nice fancy dinners.

25:20Sean Pyles:I've been loving using my European linen duvet cover every night. I'm such a warm sleeper, and in these hot summer months, I need it just to get to bed at night, and it's so soft, so comfortable, and the color is delightful.

25:33Elizabeth Ayoola:I have only just realized that there are levels to towels. I got my first set of classic organic Turkish cotton bath towels, very fancy. And I must say they are so soft and fluffy. And honestly, it's changed my perspective on buying cheap ones.

25:50Sean Pyles:Look, Quince is helping us live our domestic bliss. I love that.

25:53Elizabeth Ayoola:Stick to the staples that are going to last with elevated essentials from Quince. Go to quince.com slash smart money for free shipping on your order and 365 day returns. Yep, that's all year.

26:06Sean Pyles:That's q-u-i-n-c-e dot com slash smart money to get free shipping and 365 day returns. Quince.com slash smart money. Today's episode is sponsored by Rula. That's R-U-L-A. You know, Elizabeth, sometimes talking with someone outside of your friends or your family or your partner can be really helpful just to get a perspective on the things that you're going through and process the tough things in life. And this is where Rula comes in, because finding a therapist is hard enough, but finding one who actually takes your insurance, well, that's where most online therapy platforms fall short. Many don't work with insurance at all, which means you're stuck paying the full cost out of pocket or paying for an expensive monthly subscription.

26:46Elizabeth Ayoola:Rula does things a little differently. They partner with over 100 insurance plans, making the average copay just$15 per session. That's real therapy from licensed professionals at a price that actually makes sense for your pockets. Now think about it. You use your insurance benefits to maintain your physical health. So I mean, like, why would you not do the same for your mental health?

27:06Sean Pyles:And Rula isn't just affordable. The experience is actually tailored around you. Other online therapy platforms might match you with the first available provider, whether or not they're actually the right fit. Rula considers your goals, preferences, and background to provide you a curated list of licensed in-network therapists who are actually aligned with what you need. Go to Rula.com slash smart money to get started today. That's R-U-L-A dot com slash smart money for quality therapy that's covered by insurance.

27:34Elizabeth Ayoola:Thousands of people are already using Rula to get affordable, high quality therapy that's actually covered by insurance. Visit Rula.com slash smart money to get started. Again, that's R-U-L-A dot com slash smart money. You deserve mental health care that works with you, not against your budget. it. Let's get to our weekly money news roundup where we break down the latest in the world of finance so that you can be smarter with your money.

28:01Sean Pyles:We've just been talking about timeshares and how to get rid of them. Let's pivot to a, shall we say, slightly more stable part of the housing market, along with some ways that could help those who think they don't have enough money to buy a house. Our news colleague, Anna Hilhoske, is back. Hey, Anna. Hey, Sean Elizabeth. Yeah, we know buying a home takes a lot of cash up front. There's the down payment, there's closing costs and ideally some savings left over after you get the keys. But right now, buyers aren't getting much help from the market. Mortgage rates are back around a whopping 7 percent.

28:31And just last week, the Fed raised its benchmark rate. So instead of asking when housing is finally going to get cheaper, today we're asking what help is available if you want to buy anyway. Mortgage writers Abby Doyle and Kate Wood are here to break down how down payment and closing cost assistance works and how to tell whether it's actually a good deal. Welcome back. Thanks, Anna. Thanks. Abby, let's get right to it. Can you really get free money to buy a house? Sometimes, but I'd put a big asterisk after that word free. The important thing to know is that this money exists and you might have more options than you think that you do.

29:07Downpayment Resource, which is an online database that tracks these programs, counted more than 2 ,700 assistance programs nationwide in the second quarter. And most of these programs are run by state and local governments, but you can find help in a lot of places. Nonprofits and individual lenders have programs that they manage, too. So how do assistance programs work in practice once that you actually find one? Do you take it to your mortgage lender? Not necessarily. And that's where there's a big tradeoff here is that your lender choices when you're using home buying assistance might be more limited.

29:39State or local governments might say, like, sure, we'll help with your down payment, but here's the list of lenders that you can choose from. And you need to get a specific type of mortgage to use the assistance. So that could still leave you with plenty of options, say, like a list of 50 or so. But it narrows the playing field quite a bit. And another example, Kate and I know this, we review mortgage lenders a lot here at NerdWallet. And a bank, credit union, other mortgage lender might offer their own grant down payment assistance program for buyers. But that money comes with an obvious condition, which is that you need to get your mortgage from them, too.

30:15Right. So what does assistance actually look like? Is someone just handing you a check? Only if by someone you mean like a rich relative. But with organizations offering down payment assistance, how you receive that assistance is going to vary. So sometimes it is a grant, which basically is free money. You get it often at closing. You don't need to pay it back. Another thing we see is tax credits or tax certificates. Those give you extra cash later on when you file taxes. And again, those are an example of money you don't need to give back. So when you talk about money that you don't need to give back, are there times when there's money that you do have to give back?

30:52Yeah. So unfortunately, there are a lot of times when you do have to give the money back. Sure. Down payment assistance often comes as a loan. In a lot of cases, we see down payment assistance loans as second mortgages. So it's a loan that uses your home as collateral, but it's separate from your primary mortgage. These tend to be low interest loans and often the loan itself is deferred. So that means you don't have to pay it back until you refinance or sell the home or if you pay off the entire mortgage. Some loans are forgivable as well. So with those, once you meet certain conditions, say living in the home for five years, at that point, you no longer have to pay it back.

31:26It basically converts to a grant. And how much help are we talking about? Hundreds, thousands, tens of thousands? I'd say thousands, Ana, but it really depends. Down payment resource clocks the average award at around$18 ,000 among the programs that it tracks. So for perspective, the median home price right now, sales price of an existing home is around$429 ,000. So let's do some fast math and say you're getting an FHA loan. The minimum down payment on an FHA loan is three and a half percent. So thinking about a median priced home with that three and a half percent down payment, it would be about$15 ,000.

32:02So, yes, down payment assistance could cover your entire down payment, but it really depends on the program and whether you qualify. And who's actually going to qualify? Because affordability is squeezing people pretty far up the income ladder these days. The pool is actually a lot broader than you might think. So first-time homebuyers who have lower incomes are going to have the most options, but repeat buyers can qualify too. It's also important to bear in mind that a lot of these programs consider you a first-time homebuyer if you haven't had an ownership stake in a home in at least three years.

32:34So you could technically be a repeat buyer and still qualify as a first-timer. Having a higher income doesn't automatically rule you out either. About one in 10 of the programs tracked by down payment resource don't have income limits. Even programs that do have income limits recognize that your needs are going to vary by location and your household size. So low income for a household that's one or two people in San Francisco is still six figures, for instance. Bottom line, don't disqualify yourself from assistance before you've looked into it. All right, let's say you qualify for one of these programs.

33:04And I assume that this is where the fine print on free money comes back, right? What tradeoffs might buyers be signing up for? So let's say a program gives you free money and it's structured as a forgivable loan. That sounds great, right? You don't have to make monthly payments. All you have to do is stay in the house for five or 10 years and then the loan is forgiven. So the tradeoff is if you sell sooner than that, you might have to repay some or all of that money. Maybe on the other hand, you're like, I know I'm not going to sell this house. I'm going to be here for five years, 10 years for sure.

33:35Well, in the fine print, it's not about keeping the house. It's about keeping the mortgage. You're also giving up flexibility to refinance, right? Because a refinance is when you take your existing mortgage and pay it off and get a new one. So if you're a buyer looking for down payment assistance, the most important question to ask is, what are my obligations to repay if my plans change? Right. And that seems especially relevant for buyers today who are taking on a higher rate with the hopes of refinancing if rates eventually come down from 7%. That's potentially a big trade-off, giving up the option to refinance on your own schedule.

34:10But using down payment assistance can also affect your mortgage rate right now. It can be a lot more work for a lender to close this kind of deal, and time is money. So some mortgage lenders offset the cost of working with assistance programs by charging you a higher interest rate on your primary purchase loan. So on one hand, yes, you're getting cash for the down payment or closing costs up front, but over time, you're potentially spending more on interest than you would have if you didn't use that assistance money. Now, don't get me wrong. Assistance can still be a really big help to kind of get you past that initial hurdle.

34:42But getting the largest amount of assistance doesn't automatically mean that you are getting the cheapest mortgage. All right, so how do you figure out which offer is actually cheaper? It's always our advice, shop around. In this case, you're going to want to start with a short list of recommended lenders that participate in the assistance program that you're looking at. You want to compare at least three lenders from that list, Just because they're affiliated with the same program doesn't mean they're going to offer you the exact same rate. To cover your bases and, again, make sure that your assistance is really worth it, it's smart to get a couple of regular mortgage quotes outside that list.

35:15So offers that don't factor in down payment assistance. Yes, that's a lot of quotes, a lot of numbers. So you're going to want to compare them apples to apples. Ask for a loan estimate that's a standardized form that lets you compare the rate, closing costs, monthly payment side by side. Full disclosure, I am looking to be a first-time homebuyer somewhere in the next year. I get the value of shopping around, but that seems like a lot of work. Yeah, I totally get that. And if you don't want to do it yourself, a mortgage broker can really help in this kind of situation. Mortgage brokers compare offers through like a behind-the-scenes network of wholesale lenders.

35:49So it's kind of like a travel agent comparing flights on your behalf. They may also know about assistance programs that aren't widely advertised to the general public. So a broker is a good option to have in your back pocket if you just don't feel like doing all that shopping around yourself. Once you qualify for one of these assistance programs, how straightforward is it to actually get that money to the closing table? Yeah, because the numbers are only part of the story, right? You also want to consider a lender's experience with working with down payment assistance programs. So with down payment assistance, you're adding a lot of complexity to a transaction that already has a lot of moving parts, right?

36:23It's a lot to buy a home. You have inspections, the appraisal, seller concessions. So you want a lender that has experience closing deals with down payment assistance, this is not a great time for your lender to be learning on the job. We've talked a lot about what home buying assistance can do. Kate, what can it do? Well, it can't make an unaffordable house affordable. Assistance essentially addresses one hurdle, the cash you need up front. You still have to be able to afford the mortgage, taxes, insurance, maintenance, repairs, everything that comes after closing. Down payment assistance can be really clutch at getting you through the door, but that's basically just the startup cost of buying the home.

37:01You need to keep in mind the costs of owning the home as well. Now, Abby, you've been reporting on this for your latest Locked Out column. Are there any trends that you're watching right now? Yeah, I was pretty surprised to see that down payment is popping up as an employee benefit. When we are talking about housing affordability, government efforts like the 21st Century Road to Housing Act, these are great, but they will take a long time to trickle through and actually make a difference. It's interesting to see the private sector stepping up. Employer-sponsored assistance is still pretty rare, but it is starting to pop up, usually in large employers.

37:34Earlier this year, financial services company BNY Mellon announced that employees making$100 ,000 a year or less could get$6 ,500 in down payment assistance on their first home. Amazing. Like, imagine. Health, dental, vision. Down payment help? Exactly. Suddenly, open enrollment is getting a lot more interesting. Kate, final thoughts. What's the one thing buyers should remember if they find an assistance program that they qualify for? Look beyond the dollar amount. Understand exactly what you're agreeing to and make sure that the timeline and any potential trade-offs work with your future plans as you see them right now.

38:13And remember, the assistance might get you to closing, but you still have to be comfortable with the monthly payment that comes after it. Abby and Kate, thanks so much for joining us. Thank you. Good to be back.

38:22Sean Pyles:And thank you, Anna. That's all we've got for this episode. Remember, folks, that we as nerds are obligated to answer your money questions, so send them our way. You can hit us up on the nerd hotline And by texting us or leaving us a voicemail at 901-730-6373, it's 901-730-NERD. You can also email us at podcast at nerdballet.com or drop a comment on Spotify or YouTube.

38:43Elizabeth Ayoola:Ana, I will be expecting an invite to the housewarming, just putting that out there. Oh, of course. And yeah, thank you. And next time we have yet another question about housing. So make sure you come and listen. But we're looking at the math on buying versus renting with a condo fee this time. Until then, follow Smart Money on your favorite podcast app that includes Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. And we are on YouTube. Go and watch us and comment on there.

39:15Sean Pyles:And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. Some companies mentioned in this episode may be NerdWallet partners, but does not influence how we talk about them.

39:29Elizabeth Ayoola:And with that said, until next time, turn to the nerds.

39:37Sean Pyles:Hey, smart money fan. If you're getting this, it means that you're living in the Chicago area where Elizabeth and I are going to be recording some live episodes really soon. And we want to hear from you.

39:46Elizabeth Ayoola:And if you have been following the show, you know that Chicago has become my second favorite city in the world. And I'm so excited to be there. We want you to do us a favor and start sending in your money questions, especially if you want to come sit with us live. Maybe you have an issue with retirement savings and you're falling behind. Maybe you are trying to figure out how on earth you're going to budget in the current economy. Whatever your question is, we want to hear from you.

40:10Sean Pyles:Email us at podcast at nerdball.com with the subject line Chicago with your question. And hopefully we can talk to you when we're in Chicago in mid-October. Push your limits, train with precision, see the results. At Equinox, that's high performance loving. Iconic spaces that inspire. Personal training backed by real data. Unlimited group fitness classes from yoga and Pilates to strength and conditioning. Elevate your post-performance ritual with saunas, steam rooms, cold plunges, and more. Everything you need to lock in and unlock your potential at Equinox. Start today at equinox.com.