It’s an eco-friendly idea, but be aware how it affects your home’s financing, closing and future costs.
Fractional ownership is a money term you need to understand. Here’s what it means.
What is fractional ownership?
Fractional ownership is where several people share the ownership of an asset such as a holiday home. Unlike other forms of shared use that provide rights to use a property but don’t bestow ownership rights, each person participating in fractional ownership owns a portion of the asset.
The concept behind fractional ownership is that it facilitates the group purchase of an expensive asset, permitting each owner access to and use of the asset, according to the size of their share. When property is purchased with fractional ownership, the title is split between the owners in proportion to their ownership.
Fractional ownership can be used to purchase any form of major asset, including:
- Real estate.
- Yachts and boats.
- Recreational vehicles.
- Sports cars.
The big advantage of fractional ownership is that each owner has a direct share in the property. This means the value of the owner’s share changes as the asset appreciates or depreciates. Furthermore, each fractional owner has a say in what happens to the asset and how it is used.
Fractional ownership is different from a time share in that a time share allows use of the asset for a defined period of time only, usually a week. Time-share owners have no direct say in how the asset is used, maintained or sold.
With fractional ownership, you can buy a larger share of a vacation property, typically for a period of up to 26 weeks.
Fractional owners share responsibility for the maintenance and upkeep of the asset, although it is common practice to contract this out to a management company.
Fractional ownership example
Fractional ownership allows you to buy a share in an asset that is beyond your immediate financial reach. For example, if you want to have access to an upscale vacation property several times a year, you can achieve that with fractional ownership. Furthermore, if you decide you no longer want to use the property, you can sell your fractional ownership to someone else.
Are you interested in fractional ownership? Find a lender to finance fractional ownership.
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