Financing a fractional ownership property isn’t nearly as straightforward as typical mortgage financing. In fact mortgage industry expert, Bob Waun said that most big banks don’t offer loans for buying a fractional residence.

“Very few lenders will finance fractional interests,” said Waun. “It is a specialty [product] since there is not a secondary market for these loans.”

However, as we describe in our Decision Guide to Fractional Interest Financing, it is becoming increasingly possible to secure a mortgage for a fractional residence through one of the newer boutique companies, such as NextStar Funding and Vacation Finance, that have emerged to service this market. Interest rates on loans for fractional properties typically top the rate on a traditional 30 year fixed mortgage for a wholly owned home by nearly one percentage point. A good mix of loan types is available and come in various types from three, five and seven year adjustable rate mortgages to 15 and 30 year fixed-rate mortgages.

Fractional developers including the Ritz-Carlton and Marriott can help link their buyers with the appropriate financing. The Ritz-Carlton Club has deeded, fractional ownership real estate offering the benefits of second home ownership with five star hotel amenities. Its properties, ranging in price from just over $100,000 to more than $800,000, depending on the location and the size of the unit, are located in several resort locations including Jupiter, Fla. Aspen, Colo., and St. Thomas in the U.S. Virgin Islands. The company, which is building other properties in San Francisco and Maui, said that about 20 percent of owners finance their purchase and it refers potential buyers to NextStar.

Grand Residences by Marriott sells fractional and whole ownership second home properties in numerous vacation destinations including Panama City Beach, Fla., South Lake Tahoe, Calif., Kauai, Hawaii and London. Prices start in the low $100,000s and go up to $600,000. The company said that about 15 percent of owners secure financing for their units. Such loans typically require a ten percent down payment and carry a term of 15 years with an interest rate of nine to ten percent.

The Marriott Grand Residence Club, in South Lake Tahoe, for instance, can be financed through NextStar, while the Grand Residences London property, 47 Park Street, can also be financed through lender HSBC.

Read more in our guide

Helium Report’s Decision Guide to Private Residence Clubs and Decision Guide to Fractional Interest Financing gives a comprehensive overview of your decision process when considering fractional ownership and suggests due diligence questions to cover before you buy.