TIC Fractionalized Loans Have a Great Track Record!!
It’s refreshing to hear positive reports from one segment of the mortgage industry. Fractionalized TIC loans offered by just a few lenders, have an excellent track record of on-time payments and no foreclosures! A recent SF Gate article: Tenancy-in-common fractionalized loans weather the mortgage storm.
TIC fractionalized loans are relatively new as of the last 4-5 years. The appeal is this loan product offers less risk to a buyer who is purchasing into a TIC property. Traditionally, a group of say, three buyers purchasing a three unit property would all be under the same loan. As you can imagine, if one of the three partners defaults on payments, the other two partners are on the hook.
Then along came the fractionalized loan, which operates somewhat like a conventional loan. The drawback is that TIC loans can be a percentage+ higher than conventional financing. But, TIC’s even with their risks, are usually a more affordable option than condos or single family homes. It’s a foot in the door of San Francisco’s extremely expensive real estate market.
What’s impressive, is that this segment of the lending industry, due to their stringent lending standards (generally a 20% down minimum to buyers with solid credit scores & verified income), is doing extremely well and bypassing the mortgage meltdown woes.
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