Fractional financing

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 ownership and larger share fractional ownership which is legally known as tenancy in common (TIC).

Fractional mortgages 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.