• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The College Investor

Student Loans, Investing, Building Wealth

  • About
  • Podcast
  • Research
  • Contact
  • Save For College
      • How To Start

      • How To Save For College
      • How To Pay For College
      • What Is the Average Cost of College?
      • What Is A 529 Plan and Where to Open One in Your State
      • How Much Should You Have In A 529 Plan By Age
      • How To Use A 529 Plan For Private Elementary And High School
      • What Are Qualified Expenses For A 529 Plan (And What Doesn’t Count)?
      • The Best Brokers To Open A 529 Plan
      • Tools + Accounts

      • 529 Plans: The Ultimate College Savings Plan
      • 529 Plan Contribution Limits
      • Prepaid Tuition Plans | What To Know
      • Understanding And Using 529A ABLE Accounts
      • Using A Roth IRA To Save And Pay For College
      • FAFSA Deadlines for Financial Aid
      • CollegeBacker Review
      • Upromise Review
      • UNest Review
      • Other Options

      • Student Loan And Financial Aid Programs By State
      • The Guide To Military And VA Education Benefits
      • How To Fill Out The FAFSA
      • How To Find College Scholarships
      • The Best College Scholarship Search Websites
      • How To Find Grants To Pay For College
      • Pell Grants: What They Are And How To Qualify
      • Understanding Federal Work-Study
      • How To Use A 529 Plan If Your Child Doesn’t Go To College
  • Student Loans
      • Borrowing

        • How Student Loans Work
        • How To Apply For A Student Loan
        • How To Find The Best Student Loans And Rates
        • Best Private Student Loans Of May 2022
        • Best Student Loans To Pay For Graduate School
        • Best Student Loans To Pay For Medical School
        • Parent Loans To Pay For College
        • No-Cosigner Student Loan Options
        • Guide To Income Sharing Agreements (ISAs)
        • Best International Student Loans
      • Get Out Of Debt

        • Best Places To Refinance Student Loans In May 2022
        • Best Student Loan Repayment Plans
        • Best Student Loan Refinancing Bonuses And Promotional Offers
        • Student Loan Forgiveness Programs (The Complete List)
        • The Full List Of Student Loan Forgiveness Programs By State
        • Public Service Loan Forgiveness (PSLF)
        • Top Student Loan Scams
        • Average Student Loan Monthly Payment
        • Average Student Loan Debt By Year
      • Reviews

        • Credible Review
        • Splash Review
        • Ascent Review
        • Citizens Bank Review
        • Commonbond Review
        • Earnest Review
        • ELFI Review
        • Laurel Road Review
        • LendKey Review
        • SoFi Review
  • Investing
      • How To Start

        • How To Start Investing in High School
        • How To Start Investing In College
        • How To Start Investing In Your Twenties For 22 – 29 Year Olds
        • How To Start Investing In Your 30s For 30 – 39 Year Olds
        • How To Start Investing With $100 Or Less
        • How To Give Kids The Gift Of Stock
        • What Is Dividend Growth Investing
        • IRA Rollover Chart
      • Tools + Accounts

        • Best Online Stock Brokers
        • The Best Traditional And Roth IRA Accounts
        • The Best Robo-Advisors
        • The Best Investing Apps
        • The Best Places to Trade Options
        • The Best Places To Open A Health Savings Account
        • The Best Solo 401k Providers
        • The Best Self-Directed IRA Providers
        • Best Cryptocurrency Exchanges
      • Reviews

        • Vanguard Review
        • Fidelity Review 2022: Still One Of The Best Online Brokers
        • M1 Finance Review
        • TD Ameritrade Review
        • Charles Schwab Review
        • Robinhood Review
        • Webull Review
        • Betterment Review
        • Wealthfront Review
  • Earn More Money
      • Extra Income

        • 15 Best Side Hustles You Can Start Earning With Now
        • Side Hustle Ideas: 50+ Ways To Make Money Fast
        • 100+ Real And Honest Ways To Make Money In College
        • 80 Ways To Make Money From Home (In Your Pajamas)
        • 5 Quick Money Making Ideas (That Take Less Than 1 Hour)
        • 10 Interesting Ways You Can Make Money Driving
        • High-Paying Side Gigs That Earn $1,000 or More Per Month
        • The 10 Best Money-Making Apps
        • Paid Surveys: Earn Money For Giving Your Opinion Online
        • 10 Crazy Ways To Make $10,000 You’ve Never Heard Of
      • Build Wealth

        • 35 Passive Income Ideas You Can Use to Build Real Wealth
        • 3 Ways To Make $50,000 Per Year Without Working With Passive Income
        • How To Become A Real Estate Investor With Just $500
        • 15 Best Online Business Ideas
        • How to Create Streams of Passive Income on a Limited Budget
        • Residual Income: 7 Super Smart Ways to Build It
        • The Most Common Multiple Income Streams
        • How To Become A Real Estate Mogul With Only $10,000
      • Reviews

        • Fundrise Review
        • RealtyMogul Review
        • FarmTogether Review
        • AcreTrader Review
        • Swagbucks Review
        • Survey Junkie Review
        • TopCashback Review
        • DoorDash Review
  • Personal Finance
      • Banking

        • Best High Yield Savings Accounts Of May 2022
        • Best Money Market Accounts Of May 2022
        • 10 Best Free Checking Accounts In May 2022
        • The Best Bank CD Rates Of May 2022
        • 10 Best Business Checking Accounts In May 2022
        • The Best Online Banks Of May 2022
        • 5 Best Credit Unions Nationwide of May 2022
        • Best College Student Checking Accounts In May 2022
      • Insurance

        • Best Life Insurance Companies
        • Renters Insurance
        • Car Insurance
        • Pet Insurance
        • Umbrella Insurance
        • Disability Insurance
        • Tuition Insurance
        • Travel Insurance
      • Credit Tools

        • Best Budgeting Apps
        • Cash Advance Apps
        • How To Get A Free Credit Score Report
        • The Best Credit Monitoring Services
        • Debt Settlement: Inside The Secret World
        • Credit Repair Explained: Should You Pay For Help?
        • Best Personal Loan Companies And Lenders
        • Online Loan Companies To Borrow From Home
      • Tax

        • Best Tax Software
        • Free Tax Software
        • IRS Tax Refund Calendar
        • Common IRS Questions and Errors
        • Federal Tax Brackets
        • Capital Gains Tax Brackets
        • 401k Contribution Limits
        • IRA Contribution Limits
        • HSA Contribution Limits
  • Forum
  • Search
Home » Loans » Home Loans » Fraction Review: “Fair” Home Equity Sharing

Fraction Review: “Fair” Home Equity Sharing

Updated: May 7, 2022 By Robert Farrington

Tweet
Share
Share
Pin
Email

At The College Investor, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. TheCollegeInvestor.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The College Investor does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. TheCollegeInvestor.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

Fraction Review

For more than a decade, mortgage interest rates saw mostly downward trends, with “historically low” rates dropping year after year. But even with low rates, tapping into home equity typically means taking on more debt and higher monthly payments.

But many homeowners (particularly people living in urban areas with home shortages) are seeing their home equity position grow. Tapping into home equity could allow them to invest outside of their home, or enjoy high dollar indulgences (such as a home remodel). But taking on new financial obligations doesn’t always make sense, even when your home is a valuable asset.

Fraction is an innovative company that’s reimagining the HELOC. It operates in British Columbia and Ontario as well as Washington State. It allows borrowers to take out a no-payment loan using a portion of their house as collateral. The repayment begins after ten years or when a borrower sells their home.

Borrowers pay a minimum interest rate of 5.83-7.08% APR when the loan is repaid, but the “effective” interest rate could rise because Fraction buys an equity stake in your house. Fraction’s maximum interest rate is 11.85-15% APR. The minimum and maximum APR depend on the loan term (longer loans have higher rates). 


Fraction Logo

Quick Summary

  • HELOCs with no monthly payments for five or ten years (or pay when you sell).
  • Option to renew loan after five years.
  • Interest rate based on home price growth.
  • Fraction caps interest rates, so homeowners in fast-growing areas can capture their upside growth.
  • Loans up to 45% of your home value (35% for 10-year loans) or $1.5 million.
GET A QUOTE

Fraction Details

Product Name

Fraction HELOC

Equity Access

Up To $1,500,000

Term

Up To 10 Years

Origination Fee

2.5%

Promotions

None

Table of Contents
What Is Fraction?
What Does It Offer?
Are There Any Fees?
How Does Fraction Compare?
How Do I Open An Account?
Is It Safe And Secure?
How Do I Contact Fraction?
Is It Worth It?
Fraction Features

What Is Fraction?

Fraction is a HELOC company that is reimagining the HELOC lending space. The lender, which operates in British Columbia, Ontario, and Washington State operates more like a home equity “investor.” The loans it issues have interest rates that are tied to your home’s value rather than to some external interest rates.

As a borrower, you will pay interest rates between 5.85%-11.85%, but the exact amount you pay depends on the value of your home when you sell. The faster your home price grew during the borrowing period, the higher the interest rate you’ll pay. But Fraction caps the maximum interest rate, so you can capture additional upside if your house grew at an astronomical rate.

What Does It Offer?

Fraction offers HELOCs for paid-off homes in British Columbia, Ontario, and Washington, but these aren’t traditional HELOCs. The Fraction HELOC has a unique array of features.

Must Have A Paid-Off House

Fraction must have a first-lien position on your house. That means you must own your house free and clear to take out a loan from Fraction.

Can Be Used To Buy A House

The only “exception” to the paid-off house rule is for homebuyers who want to use Fraction to buy a house. Fraction has a maximum LTV of 35% for ten-year loans, so borrowers need to put at least 65% down to get a 10-year loan.

Fraction Screenshot

Access Up To $1.5 Million Immediately

Fraction offers HELOCs up to $1.5 million or 45% (35% for 10-year loans) of your home equity position. Once approved, borrowers can get cash immediately.

No Monthly Payments For The Loan Term

Fraction offers five and ten-year HELOC terms. During the borrowing period, borrowers pay no monthly payments.

Floating Interest Rate Based On Your Home's Value

The Fraction interest rate always falls in a range between 5.83%-11.85% APR for five-year loans. Ten-year loans have interest rates ranging from 7.08%-15%. However, the interest rate doesn’t depend on some external interest rate. Instead, the rate depends on your home’s value when you pay off the loan.

Full Repayment Required

When a borrower sells their home, their loan is due in full. The loan is also due in full when the loan term expires. Borrowers who cannot repay their loan may have the option to extend their loan for an additional five years.

Option For A 5 Year Renewal

Fraction offers a five and 10-year loan product, but borrowers can request a 5-year loan renewal when their term is up. The renewal is subject to a credit check and an appraisal. If approved, borrowers have to pay a 1% loan renewal fee.

No Out-Of-Pocket Costs

Borrowers pay a variety of fees including a 2.5% loan origination fee. However, this fee can be deducted from the proceeds of the HELOC, so your out-of-pocket borrowing costs are limited or even $0.

Very Limited Availability

Fraction only issues loans in British Columbia, Ontario, and Washington State.

Are There Any Fees?

When taking out a HELOC through Fraction you’ll pay a variety of fees including an inspection and appraisal fee, title insurance fees, and a 2.5% loan origination fee.

These costs can be deducted from the loan proceeds, so you will not have out-of-pocket fees at the time of borrowing.

Borrowers who choose to extend their loan beyond the initial five-year term will pay a 1% loan renewal fee at the point of renewal.

How Does Fraction Compare?

Fraction is a loan designed to help homeowners access their home equity. The tool it offers is either the “best of both worlds” or the worst depending on how you view it. 

As a loan, Fraction has modest fees (especially compared with Reverse Mortgages), and it requires no monthly payments for ten years. However, the “interest rate” on the loan is pegged to your home value. And many Fraction borrowers will see effective borrowing rates in the double digits. Borrowers pursuing traditional HELOCs will typically have to make payments, but their interest rate is more stable than Fraction’s. To compare HELOC and Reverse Mortgage rates, you can use a site like LendingTree which allows users to get real quotes from multiple competitors.

Unlike a typical home equity sharing arrangement, Fraction puts a bit more risk onto homeowners. If a home’s value goes down, the borrower still has to pay Fraction principal and a minimum interest rate. However, the maximum interest rate is capped. If your home value explodes, you capture the upside. People engaging in home equity sharing arrangements typically don’t have “downside” risk, but they also don’t get to capture the upside gains. People who want downside protection can consider HomePace for an equity sharing arrangement.

No matter how you slice it, Fraction offers a unique product. It’s important to compare Fraction to HELOCs, Reverse Mortgages (If you’re at retirement age), and home equity sharing arrangements, to see whether it makes sense for you.

Here's a quick comparison with some of the more popular home-equity sharing products:

Header
Fraction Logo
Point Logo

Rating

Equity Access

Up to $1,500,000

Up to $350,000

Up to $500,000

Term

10 years

30 years

30 years

Fees

2.5%

3-5%

3%

Cell
GET A QUOTE
READ THE REVIEW
READ THE REVIEW

How Do I Open An Account?

The Fraction online Application is simple and secure. Applicants start by providing their property address, so Fraction can ensure the home is in the proper lending area. Assuming the property qualifies, users provide personal and financial information before submitting their basic online application.

To be approved, borrowers will undergo a credit check and a home appraisal to ensure that the asset can back up the loan.

Is It Safe And Secure?

Fraction is a technology company that is used to doing business online. Its website is secure and encrypted to help keep user information safe. It is also a BC licensed mortgage broker in Canada and a member of the National Mortgage Lending Services in the US. These accreditations show that Fraction is required to uphold a certain set of standards to protect borrowers. In the US, this includes showing borrowers loan and fee documents.

How Do I Contact Fraction?

The United States-based headquarters for Fraction is 2120 University Ave, Unit 407, Berkeley, 94704. In the United States, you can call Fraction at 1-844-562-5546. People with questions can also use the contact button in the bottom right corner of the Fraction website.

Is It Worth It?

Fraction has an interesting value proposition, but the effective interest rates on the loans seem high, even given the rising interest rate environment that we’re in today. That said, no payment loans are unique, and they offer value to people who want to access their home equity without increasing their monthly outflows.

In general, tapping into home equity for luxury spending isn’t a great idea. But using home equity to invest elsewhere, or to pay for truly important expenses (kids' college for example) can be a decent option. Before you use Fraction, compare it to other loan options to make sure you get the best deal.

Fraction Features

Equity Access

  • Up to 45% of your home's total value
  • Maximum investment of $1,500,000

Fees

2.5% origination fee

Term

10 years + 5 year renewal

Max Loan-to-Value Ratio (LTV)

45%

Average Credit Score

No firm requirement

Max Debt-to-Income Ratio (DTI)

N/A

Prepayment Penalty

No

Interest Rate Type

Hybrid up to 15% APR

Inspection

Not required

Customer Service Number

844-562-5546

Customer Service Hours

Mon-Fri, 8 AM – 5 PM (EST)

Customer Service Email

Contact Form

Mobile App Availability

None

Promotions

None

Fraction Review
  • Rates And Fees
  • Ease Of Use
  • Products and Services
  • Customer Service
  • Availability
Overall
3

Summary

Fraction is a HELOC alternative for paid-off homes that may be a better option than a HELOC or cash-out refinance.

Pros

  • No Monthly Payments.
  • Fraction caps its interest rate, so homeowners can capture upside potential.
  • Get access up to $1.5 million

Cons

  • Homeowners pay a minimum of 5.83% APR on their loan, and the interest rate can go higher.
  • Could end up being more expensive than loan alternatives.
  • Must have a fully paid-for house to use Fraction.
  • Only available in select areas in Canada and the US.
  • Get A Quote
Robert Farrington
Robert Farrington

Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.

He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.

He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.

Fraction Review: “Fair” Home Equity Sharing
Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
Subscribe
Connect with
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
Notify of
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
0 Comments
Inline Feedbacks
View all comments

Primary Sidebar

Robert Farrington

Hi! My Name is

America's Millennial Money Expert

Welcome to The College Investor. We're here to help you escape student loan debt so you can start investing and building wealth for the future

Our expert guides, reviews, and more are designed to help you achieve your financial goals.

Want to learn more? See what's in my wallet.

As Featured In

Social Media

Popular Posts

Side Hustling

Side Hustle Ideas: 50+ Ways To Make Money Fast

Best Side Hustles

15 Best Side Hustles You Can Start Earning With Now

Make Money From Home

80 Ways To Make Money From Home (In Your Pajamas)

Crazy Ways To Make $10,000

10 Crazy Ways To Make $10,000 You’ve Never Heard Of

Make $50,000 Per Year

3 Ways To Make $50,000 Per Year Without Working With Passive Income

Student Loan Scams

Top Student Loan Scams

Net Worth of Millennials

The Average Net Worth Of Millennials By Age

Ways To Get Student Loan Forgiveness

Student Loan Forgiveness Programs (The Complete List)

Passive Income Ideas

35 Passive Income Ideas You Can Use to Build Real Wealth

529 Plan By Age

How Much Should You Have In A 529 Plan By Age

Ultimate Guides

529 Plan Guide

529 Plans: The Ultimate Guide To College Savings Plans

Student Loans and Financial Aid By State

Student Loan And Financial Aid Programs By State

Student Loan Advice

The Definitive Guide To Student Loan Debt: Everything To Know About Your Loans

Student Loan Forgiveness By State

The Full List Of Student Loan Forgiveness Programs By State

newretirement

How to Start Saving Now: The College Graduate’s Guide to Saving for Retirement

Latest Research

Institutional Merit Grants

Who Gets Institutional Merit Grants At Private Colleges?

Resume Student Loan Payments

Survey: Even With Higher Expenses, Most Student Loan Borrowers Are Ready To Resume Payments

Support From Parents Survey

64% Of Millennials Receive Support From Their Parents

undermatching at selective colleges

Undermatching: Why Do Smart Low-Income Students Not Enroll In Selective Colleges?

How Much Americans Pay To File Their Taxes

How Much Americans Pay To File Their Taxes

Footer

Banking

  • 10 Best Free Checking Accounts In May 2022
  • The Best Online Banks Of May 2022
  • The Best Bank CD Rates Of May 2022
  • Best Money Market Accounts Of May 2022
  • Best High Yield Savings Accounts Of May 2022
  • Best High-Yield Checking Accounts Of May 2022
  • The Best Bank Bonus Offers
  • The Best Business Checking Accounts

Investing

  • Best Online Stock Brokers In 2022 (According To Readers)
  • Best Brokerage and Investing Bonus Offers In May 2022
  • The Best Places To Open An HSA (Health Savings Account)
  • 5 Best Investing Apps With Free Stock Trading
  • How To Buy Stocks Online For Free
  • The Best Robo-Advisors Of 2022
  • The Best Self-Directed IRA Providers
  • The Best Traditional And Roth IRA Accounts Of 2022
  • Comparing The Most Popular Solo 401k Options
  • Top 3 Automatic Investment Apps Of 2022

Student Loans

  • Best Places To Refinance Student Loans In May 2022
  • Best Private Student Loans Of May 2022
  • How To Find The Best Student Loans And Rates
  • Best Student Loan Refinancing Bonuses And Promotional Offers

Insurance

  • The Top 10 Online Life Insurance Companies
  • The Ultimate Guide To Renters Insurance – Everything You Need To Know
  • The Cheapest Car Insurance For College Students

Connect

  • Contact Us
  • Advertise
  • Press & Media

About

  • About
  • Our Team
  • Podcast
  • Editorial Guidelines
  • How We Make Money
  • Archives

Social

Copyright © 2022 · The College Investor · Privacy Policy ·Terms of Service · DO NOT Sell My Personal Information

wpDiscuz