Fractional financing is a
real estate investment structure that allows funding for multiple investors to collectively own a single property. Each investor owns a fraction or percentage of the property and receives a proportional share of the income and expenses generated by the property.
Fractional financing can take two forms: traditional
timeshare
A timeshare (sometimes called a vacation ownership or vacation club) is a Real property, property with a divided form of ownership or use rights. These properties are typically resort Condominium (living space), condominium units, in which mul ...
ownership and larger share
fractional ownership which is legally known as
tenancy in common (TIC).
Fractional
mortgage
A mortgage loan or simply mortgage (), in civil law (legal system), civil law jurisdictions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners t ...
s for shares of 1/26 ownership or 2 weeks or fewer are considered timeshare financing, and is often provided initially by the project developers. Larger shares of ownership is generally considered fractional ownership or tenancy in common and are provided by specialist mortgage providers.
Fractional financing is more difficult for most lenders since there is a small market for these loans, and no established secondary market for vacation finance mortgages of these types. Several companies make loans for fractional homes, yachts, planes and other properties.
References
Mortgage
{{finance-stub