Financing Your Fractional Ownership Purchase

Part Two In A Three Part Series. Part one was: Understanding The Basics Of Fractional Ownership

Financing Your Fractional Ownership Purchase:

Once you make the decision to become a fractional owner, you’ll need to understand your options of payment. It’s true that most lending organizations are hesitant to finance a fractional purchase. If an owner defaults on payments, it will be very hard for the lender to resale the property. In the past, buyers would use a second mortgage on their first home to pay for their ownership. There was an evident void in the buying process due to the fact that many buyers did not want to tie up the equity in their primary home or sell a piece of their stock portfolio. That’s when the concept of financing fractional ownership came into play.

Financing available to the fractional buyer is usually offered through the developer. Wyndham Vacation Ownership, www.wyndhamworldwide.com, has over 400 employees in Las Vegas, Seattle and Orlando dedicated to financially servicing their customers. The department is responsible for approximately 240,000 loans with an aggregate principal balance of over $2.4 billion. Wyndham Vacation Ownership has developed or acquired over 140 vacation ownership resorts throughout North America and the South Pacific that represent more than 18,000 individual ownership units and more than 750,000 owners of vacation ownership and other real estate interests.

While not all companies have in-house finance departments, they do have relationships with financial institutions that will work directly with the buyer. The financial lenders that fractional ownership companies partner with are prepared to finance the bulk of the purchase price, as well as closing costs and pre-paid maintenance fees. Five years is usually the term for paying back a fractional ownership loan. Most of the time there are no origination fees or prepayment penalties assessed on these loans, but they are subject to market conditions.

Some smaller banks, known as boutique banks, will do the loans on an in-house basis. One company, First Fractional Funding, claims to have perfected the financing of fractional properties. (www.firstfractionalfunding.com) They do offer a very informational website and opportunities to ask questions through e-mail and phone. Their overview boasts that their underwriting guidelines are very straightforward, and will answer any questions within 24 hours.

Buyers can expect a high interest rate no matter how they finance their fractional property due too the non-conventionalism of the product. Google searching the subject will lead you to a plethora of buy, buy, buy websites. Availability of information on the subject is little while the supply of fractional buying opportunities is plentiful. It is important to be educated on the different financing options before you make a final decision on the company from whom you choose to purchase.

Everyone’s best bet is to visit sites such as www.vacationownership.com or www.arda.org. Both of these sites are dedicated to providing information and news updates on fractional ownership and the timeshare industry. A comprehensive guide to understanding fractional ownership can be downloaded from the homepage of the American Resort Development Association’s (ARDA) website.