Should you purchase a timeshare, RV, or vacation home? We’ll examine all three of these investments and ask some important questions including whether or not you can use your VA home loan benefit to make any or all of these purchases.
The most important question to ask yourself for any of these purchases? That depends on your circumstances but if you are an active duty service member subject to deployments, TDY, continuing education, or are in a career field that requires a great deal of travel your priorities are obviously different than someone who has retired after a 20-year career in uniform or more.
There’s no one-size-fits-all answer to these issues with one very notable exception, which we’ll cover below.
Should You Purchase A Timeshare?
A common feature of timeshares–and a common complaint about them–is that you pay good money for a property you only get to use for a limited amount of time each year. If that were the only issue with purchasing timeshares, that might be the end of the article for them.
But the fact that you are charged a maintenance fee for that purchase combined with the fact that most timeshares have escalating maintenance fees makes for a bad investment in the minds of some.
The Federal Trade Commission has an entire page on its official site dedicated to “bewares” about purchasing timeshare property. The FTC reminds potential investors that you will agree in writing to either own the timeshare for life, or for the time specified in your legally binding purchase agreement.
Not all timeshare sales offerings are the same–some are for timeshares that are to be constructed in the future on currently undeveloped land.
Read The Fine Print Twice
There is an extremely high potential for fraud in such cases and those who do plan to invest in this way must be vigilant–the contract you agree to should have clauses for non-fulfillment of the original deal, especially where construction delays and other problems are concerned.
If you don’t see it in writing, you aren’t protected. You will need to make sure what you are signing is not a one-way contract that favors the seller and you may require the advice of legal counsel with experience in real estate law and contracts to help you determine whether the contract is a good one or a bad one.
Don’t Sign If You Have Questions
Don’t sign ANYTHING you do not fully understand and definitely do not sign a contract that is different than what was promised.
And then there are the timeshare resellers and timeshare exchange companies–third parties offering to buy your timeshare or sell you one. As with any investment, you will need to research the seller, developer, and management company before you commit to anything in writing.
Any time you do business with a timeshare reseller, ask for the specifics where terms, conditions, and the legally binding contract you are signing are concerned. In any case where the deal is not what you asked for or what you expect, do NOT sign a contact. Renegotiate or walk away.
Should You Purchase A Vacation Home?
When considering a vacation home, you have a different set of issues to contend with than those buying into timeshare properties do. For a start, you will need to determine which home you will use as your primary residence and which home will be the “vacation home.”
Some lenders will not approve mortgages for occasional occupancy properties, and others will. Much depends on the kind of loan you seek (more on that below) and other variables such as your FICO scores, loan repayment history, etc.
These issues are important because your lender will need to establish you as a good credit risk. If you are already making mortgage payments on a property and your payment record is good, the next thing your lender will want to know is how the new loan affects your debt-to-income ratio.
But if you are applying for a home loan to purchase a vacation property and you have a spotty record of making your mortgage payments, the next question the lender is likely to ask has more to do with, “What justifies approving this loan when the existing mortgage isn’t being paid on time?”
Vacation homes don’t carry the same degree of risk that timeshares do in the sense that you are dealing with third parties who must maintain the timeshare when you aren’t using it, the applicable maintenance fees associated with that upkeep, etc.
But they do have a degree of risk in remaining vacant for long periods of time; not because of your financial obligation but rather because of potential risks due to bad weather, possible break-ins of unattended property, etc.
Those who anticipate these issues can minimize them. Those who do not often learn the hard way why it can be more challenging to maintain two houses at once.
Should You Purchase An RV?
Opinions about recreational vehicles or RVs vary. Owning an RV is not for everyone–there are specific challenges associated with the simple act of getting out of the driveway with one of these impressively oversized vehicles, and the gas mileage for RVs is notoriously terrible. If you need fuel efficiency in your life, driving an RV is not for you.
You read the above correctly–we are DEFINITELY implying that you need special driving experience to properly handle a recreational vehicle, the same way those who drive 18-wheelers professionally are never allowed to simply buy a truck and start driving.
Operating an RV requires training which many dealers are happy to provide. The key to understanding what you are getting into with an RV starts here–you will need to be taught how to safely operate your new vehicle.
Where To Drive
Some people don’t mind these issues, as much as they may seem like drawbacks to others. RVs are great for driving cross-country on America’s major highways, but if you are an urban explorer and are looking for a vehicle that will take you off the beaten path into America’s state roads, farm roads, county roads or other places that aren’t really designed to accommodate a huge vehicle, you won’t be interested in using an RV to take those journeys.
Important factors to consider when thinking of an RV purchase include depreciation–RVs lose a great deal of value once they are sold. Don’t expect to get the same money you spent if you choose to sell. Another thing to remember–you cannot park an RV in any location.
There are restrictions to observe, potential fines, and more. You can’t keep track of all local ordinances that might affect a long journey in your vehicle, but you’ll definitely need to know where and when you are allowed to legally park.
What All These Things Have In Common
As mentioned at the start of this article, there are no one-size-fits-all rules for timeshares, RVs, and vacation homes. However there is ONE major exception you should know up front about the purchases we are discussing here.
Using A VA Home Loan To Buy An RV, Timeshare, Or Vacation Home
The one-size-fits-all rule about these purchases is this–you CANNOT USE A VA MORTGAGE to purchase ANY of them. Why?
Where timeshares are concerned, the VA loan rules are quite specific–you can’t purchase occasional occupancy property with a VA mortgage.VA mortgages to purchase property are for primary residences ONLY.
That principle applies for vacation homes too–in fact, the VA Lender’s Handbook (VA Pamphlet 26-7) mentions vacation homes specifically as a kind of property that does not meet VA standards for occupancy and primary residences.
And where recreational vehicles are concerned, you can’t use a VA mortgage to buy these because they cannot be taxed or legally classified as real estate or “real property.” All properties purchased with a VA mortgage must be affixed to a permanent foundation that meets VA standards at closing time or at a time specified in your purchase agreement. RVs cannot be classified as real estate and hence are not eligible for a VA mortgage loan.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
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