| > | | | | provide specialized loan products to fund the |
| There are four alternatives for financing your | | | | acquisition of fractional ownership properties. |
| fractional ownership vacation home. The first, | | | | Unfortunately the largest and most prominent |
| obviously, is cash -— buy your fractional | | | | company offering these financial products has just |
| share outright. The second option is to use the | | | | withdrawn their fractional lending products |
| equity in your primary residence. Option three is | | | | because of recent challenges in the credit |
| to find a mortgage. The fourth option for | | | | markets.According to the Helium Report (March |
| funding your fractional ownership vacation home is | | | | 26, 2008), a newsletter covering developments in |
| financing provided by the developer of the | | | | the fractional vacation home industry, First |
| fractional project. | | | | Fractional Funding left the mortgage business |
| Purchasers are often curious to learn about how | | | | after its lending partner, the National Bank of |
| to finance the acquisition of a fractional share of a | | | | Kansas City stopped providing the mortgages.A |
| luxury vacation property. Fractional ownership is a | | | | few other companies are continuing to underwrite |
| relatively new model and many traditional lenders | | | | specialized fractional mortgage products. NextStar |
| are not well-informed about it. What are the | | | | Funding, Vacation Finance, and Sterling (MI) Bank |
| options for financing a fractional property | | | | and Trust are still providers in the fractional |
| purchase?There are four main options for how to | | | | lending market. With the tightening of credit after |
| finance your fractional ownership vacation | | | | the subprime lending industry meltdown, |
| property. The first, obviously, is cash -— | | | | purchasers may expect more scrutiny of their |
| buy your fractional share by paying for it in full. | | | | loan applications. Fractional mortgage rates can |
| This is the simplest method, and also probably the | | | | easily run 1.25% to 1.5% more than traditional |
| most out of reach. Many people don't have | | | | mortgage products.The fourth option to fund |
| immediate access to $100K - $400K (or more) in | | | | your fractional ownership vacation home is a loan |
| liquid funds.The second alternative is to use the | | | | product offered by the developer of your |
| equity in your primary residence. Obtain a home | | | | fractional vacation home. Some fractional vacation |
| equity line of credit (HELOC) and make use of the | | | | homes do provide a self-financed option. Generally |
| proceeds to pay for your vacation home | | | | there is a down payment in the neighborhood of |
| fractional share. This approach has many | | | | 20% of the purchase price, and the loan is |
| advantages. HELOCs are less trouble to get than | | | | amortized over a relatively short term (5 years), |
| mortgages; and the interest on the home equity | | | | sometimes with a balloon payment at the end of |
| loan is tax deductible as mortgage interest on | | | | that period.If you are able to get owner financing |
| your primary residence. Of course, you may not | | | | you can provide the down payment in cash or by |
| have enough equity in your primary residence to | | | | tapping the equity in your home. This method has |
| fully cover the acquisition of your vacation | | | | the benefit of simplicity and ease, and you may |
| property.Option three is to obtain mortgage | | | | complete the transaction quickly and with minimal |
| funding. There are a number of lenders who | | | | scrutiny and paperwork. |