You’ve no doubt noticed that the real estate market’s been hot over the last few years.
According to this April 2022 CREA report, home prices rose 21% year over year as of January 2022, and things are still climbing. If your real estate adventure has left you wondering about ways to take advantage of newfound gains, you’re not alone.
With many options to consider, we thought it might be time to take a look at a close-to-home solution. Vancouver-based company Fraction has been making headlines across the industry lately, so we decided to review their offering.
Here are some of the ways those clever people over at Fraction have helped Canadians use their home equity to meet their financial goals.
Unlock your future.
A Fraction Mortgage allows homeowners to tap into their home equity to access money for retirement, an investment opportunity, to clear high-interest debt, or to cover home renovations. When used strategically, it can also be used to help homeowners access money for a second property.
Typically, there are two types of properties that see borrowers using equity to buy a new home:
Purchasing a home or condo and turning it into a rental can be a smart way to use home equity.
The rental income can pay off the loan or become its own source of income, with the bonus of the property potentially appreciating in value. We call that a win-win.
Whether it’s in Kelowna or Point Roberts, having a vacation home is a dream for many homeowners. With the help of Fraction, that dream can become a reality.
Before committing to buying a second home, just be sure you first understand how to finance it. There are some additional expenses that come with rental or vacation homes depending on where you live, so do your homework.
How would you like to pay?
When it’s time to buy a second property, you have several payment options.
Some buyers put down cash, while others use conventional loans. These come with an expected downpayment of 20 - 35% and carry higher interest rates.
You could also tap into a home equity loan, which is dependent on having enough equity in your current property. These three options have been the most common ways to finance a second property for decades, while a Fraction Mortgage is a new, innovative way to access capital.
Here are the details.
A simple solution.
Fraction allows you to convert up to 45% of your home equity into payment- and tax-free cash. There are no age or income restrictions, and no prepayment penalties.
How you use that money is entirely up to you. You could tackle your debt, start a new business or invest in a second property, all without the pressure of monthly payments.
Cut to the chase.
Overall, the process of applying for a Fraction Mortgage is really straightforward. After applying for an estimate and receiving a credit check and home appraisal, Fraction can get you up to 45% of your hard-earned equity to spend, save or invest as you please.
The interest rate you pay back is variable and based on your home's appreciation, with a minimum and maximum cap. At the end of your term, they simply calculate your interest rate based on the change in value of your home, and every five years, Fraction checks in with you to see if you want to renew, payout the mortgage, or sell your home.
A Fraction Mortgage does come with the expected origination fees, home appraisal fees, and inspection fees (only required for loans over $1 million), plus independent legal advice and conveyance, and title insurance. We also need to mention that Fraction has a minimum FICO score requirement of 640.
The ball’s in your court.
The easiest way to see what a Fraction Mortgage can do for you is to play around with the widget on their website. See the numbers for yourself. In fact, the whole Fraction process is entirely online, or you’re welcome to give the humans there a call.
Explore your options.
There’s more to home ownership than payments. If that’s all there was to it, it wouldn’t be a journey worth taking. Owning a home is really about carving out a corner of the world for you and your family. It’s about putting down roots where you can throw backyard birthday parties, create your fortress of solitude, or do some well earned front-porch-rocking.
If you’re ready to learn more about tapping into your home’s equity, a Fraction Mortgage can unlock up to $1.5 million of it. The Fraction Mortgage features no monthly payments and fair interest rates.