Second-Home Buyers Can Finance Properties Using "Fractional" Florida Home Loans

Catering exclusively to second-home buyers, a Birmingham, Michigan-based home loan provider with operations in Florida, is expanding its fractional home loan program.

Bob Waun, CEO of Vacation Finance, told Crain’s Detroit Business that the improved rates and terms if his unuique program will make it successful.

“The fractional business is booming, it makes good financial sense for the home buyer, they can own multiple homes at the price of just one cottage,” he said. “There are fractional projects popping up in every major vacation home market in America, and we intend to to lend to all the best projects.”

Most lenders will not lend to fractional home purchasers because of the complicated effect on real estate title. When a 1/4 share of a condo is sold to the consumer, they receive both a deeded real interest of 25 percent of the property, plus a limited time use right.

“Time use has often carried a ‘timeshare‘ stigma that is rapidly declining because timeshare is now a trillion-dollar industry and widely accepted by the consumer and lending community as a good value,” said J.H. Heck, a Fractional expert at Vacation Finance.

“We have studied the vacation ownership industry and understand the dynamics like no other lender, and we know how to get projects and consumers financed, with less hassles and more loan choices.”

The company is trying to compete where others will not. Presently, the major secondary home loan buyers — Fannie Mae, Freddie Mac and major wholesale mortgage banks — are not interested in buying fractional Florida mortgage loans. This is not expected to change in the near future, but Vacation Finance is undeterred.

“We like the fractional paper because we understand it and the buyers who purchase this niche real estate, it is too small of an opportunity for large lenders, but a trend that is skyrocketing,” Waun said. “The same buyers of fractional real estate, buy fractional aircraft and yachts, and we like these borrowers.”

If you are looking into entering the fractional Florida home loan market, be advised that taking on more than one loan at the same time will stretch your finances thin. Make sure you plan ahead and ensure that you can make the payments, especially if mortgage rates continue their steady rise.