- No monthly payments
- No early buyout penalty
- Interest rate tied to changing value of your home
- High minimum credit score and down payment required
- Limited repayment terms
- Only available in Ontario, British Columbia, and Washington
Founded in 2021, Canadian-based fintech startup Fraction is a direct lender that takes a novel approach to the mortgage and home equity loan business. Rather than charging monthly payments with interest for a conventional loan, Fraction enables you to borrow up to 45% of your current or new home’s appraisal value. The full value of the loan plus interest is not due until the end of the term. The interest rate you pay is dependent on your initial appraisal and the value of your home at the end of the term or when you pay off the loan in full.
In addition to the cost of the loan and any accrued interest due at the end of the term, Fraction charges a 2.5% origination fee. You can also pay a 1% renewal fee at the end of the term to begin a new 5- or 10-year term.
While Fraction is most suitable for homeowners of retirement age who own a home in areas with high appreciation rates and lack suitable funds for their retirement, it is available to all homeowners above the age of 18 who own at least 55% of their home’s value. By granting you access to your home’s equity without making monthly payments, Fraction gives you access to capital to invest, renovate your home, or pay off your higher-interest debt without increasing your monthly expenditures. That said, it’s currently only available to borrowers in British Columbia, Ontario, and Washington.
Generally speaking, Fraction is more suitable for people accessing their current home’s equity because it requires borrowers to own at least 55% of their home’s value when applying for a loan to purchase a new home.
Types of Loans/Products
Fraction is a direct lender that offers 5- and 10-year loans with interest rates based upon the appreciation in your home’s value. Its loans can be used to access the equity in your existing home or to buy a new home.
Rates: starting at 5.83% for 5-year and 7.08% for 10-year
Minimum credit score: 640
Repayment terms: 5- and 10-year
Minimum home equity ownership of 55%
The Application Process
At Fraction, the application process includes 4 simple steps:
- Apply online or over the phone
- Get approved and sign your agreement
- Receive your funds
- Renew or pay back your loan at the end of the term
During the initial application, a mortgage advisor will estimate how much of your home’s value you can unlock. Afterward, you’ll need to complete a credit check and get an official appraisal of your home before you get the final terms of your loan.
The documentation you may need to submit includes a photo ID, bank statements, and financial reports if you currently have a mortgage or plan to apply for a new mortgage.
Whereas an application through most lenders takes between 2-4 weeks to complete, Fraction can complete the process in just a few days depending on how quickly you’re able to schedule your initial home appraisal.
Fraction offers 5- and 10-year repayment terms. Your rate will differ based on the repayment term. The lump sum that you receive from Faction can be accessed throughout your pre-determined draw period. Once you enter your repayment period, you can no longer withdraw funds, but you will only pay interest on the funds actually withdrawn. Your initial rate is set at the start of the term and finalized when you pay off your loan or at the end of the term. Alternatively, you can choose to pay a 1% renewal fee to extend your repayment horizon beyond the initial 5- or 10-year term.
Help & Support
Customer support is available via phone, email, or chat. Chat and phone support are available from 9am-5pm PT, Monday-Friday. You can also schedule a phone call with a mortgage advisor by reaching out to a customer support agent. If you need assistance outside of business hours, you can check out Fraction’s FAQs page.
How Fraction Compares
Here’s how Fraction compares to some of its competitors.
|Minimum Credit Score||640||620||580|
|Minimum Down Payment||50%||3%||3.5%|
|30-year Fixed-rate APR||N/A (starting at 7.08% for a 10-year term)||4.095%||From 2.85% (varies by lender)|
|Best For||Homeowners over the age of 18 in high appreciation areas who need additional funds||Buyers with strong credit||Interest rate offers|
Fraction is a home equity product that offers direct loans up to 45% of your current or new home’s appraisal value. It offers 5- and 10-year loans with interest rates tied to the appreciation in the value of your home. Applicants must undergo a credit check and get a full appraisal of their home prior to approval. You can complete your application online and receive funding within a matter of days.
Which areas does Fraction lend in?
Currently, Fraction lends in British Columbia and Ontario in Canada and Washington State in the United States.
What are the costs associated with Fraction?
Fraction uses 3rd-party appraisers to assess your home’s value, and that cost is payable by the applicant. It also charges a 2.5% origination fee and a 1% renewal fee if you decide to renew at the end of your initial term.
Can I use Fraction to finance loans on multiple homes?
Yes. Fraction can lend up to $2,000,000 to a single person with a maximum of $1,500,000 per property.
Is Fraction a 1st lien or 2nd lien loan?
Fraction must be the 1st lien or charge on your property at the time of origination for your loan and until your term ends.
1050 Homer St, Vancouver, BC V6B 2W9
240 Richmond St W, Toronto, ON M5V 1V6
2120 University Ave, Berkeley, CA 94704
This review was created based upon 3rd-party reviews and information available on the company’s website.
Fraction Lending US, Inc.
NMLS #: 2084341
Equal Opportunity Lender
*Fraction HELOC annual percentage rates range from 5.83% to 11.85% for a 5-year term and 7.08% to 15.00% for a 10-year term. You will be charged an origination fee of up to 2.5% of the total loan amount. You will also be responsible for paying recording fees, which vary by county, as well as inspection and appraisal fees, which vary by property.