Timeshare vs. Vacation Home Purchase: What's Best for You?

The option you choose might hinge on your ultimate goal.

Some people like to travel somewhere new every year. But maybe there's a specific area you enjoy visiting year after year, and you've reached the point where you don't want to have to search for lodging every time you're ready to roll into town. If so, you may be torn between a vacation home and a timeshare. But which option is best for you?

The pros and cons of a vacation home

When you buy a vacation home, well, you're buying a home. That could mean signing a large mortgage loan and having expensive monthly payments to grapple with.

Plus, when you own a home, you don't just have to cover your mortgage. You also have to pay for homeowners insurance, property taxes, maintenance, and repairs. And unlike a timeshare, where you pay a yearly maintenance fee to cover things like upkeep and repairs, when you own a vacation home, those expenses are all on you.

That said, if you buy a vacation home, you may be able to treat it as an investment. That property could gain value over time, and since it's yours, you'll have the option to sell it at a profit.

What’s more, you may decide to rent out your vacation home when you're not using it for extra income. Unless that home is part of an HOA with strict rules barring that, it's an option you'll have every right to exercise.

The pros and cons of a timeshare

A timeshare may not constitute the same financial commitment as owning a vacation home. Yes, you'll have to put down some money. But since you're only buying the rights to use a property for a week or two out of the year, you're most likely not talking about anywhere close to the down payment you might have to put on a vacation home.

Also, Dave Ramsey says that in 2021, timeshare maintenance fees came to $1,120 a year. Now, that's not a small amount of money. But your costs could be considerably higher than that if you have a vacation home you're tasked with maintaining yourself.

On the other hand, when you buy a timeshare, you don't own a piece of property. So a timeshare really cannot constitute an investment -- it's only an expense.

Plus, while it's often possible to turn a vacation home into an income property, with a timeshare, you're unlikely to make money. To do so, you'd need to rent out your timeshare at a high enough price to cover your costs and come out ahead. And some companies don't even let you rent out your timeshare.

What's the right choice for you?

Whether you opt for a vacation home versus a timeshare should ultimately hinge on your goals and the financial commitment you're looking to make. If you're eager for an investment opportunity, then a timeshare won't fit the bill, whereas a vacation home might. But if you're looking for a way to guarantee yourself a place to stay in your favorite vacation spot, then a timeshare might be a more cost-effective option than sinking tons of money into a vacation home.

Either choice, though, is a big decision and a huge financial undertaking. So you'll need to really make sure it's the route you want to take.