Tenancy-in-common (TIC) loans are no longer limited to adjustable-rate terms. It’s official: You can now get a 30-year fixed loan.
Part of the reason fractional loans haven’t moved beyond adjustable-rate mortgage (ARM) products is because the idea behind TICs was to condo convert in a few years. So you’d end up refinancing out of the TIC loan, anyway. Plus, the handful of TIC lenders out there wanted to limit their exposure in the riskier fractional financing market.
But condo conversion has long been suspended for buildings with three or more units, so that aspect isn’t really relevant anymore. And fractional loans have turned out to be successful for lenders, as there haven’t been many loan defaults among the well-qualified buyers who meet the lender guidelines for income, credit and assets.
Lenders are obviously now comfortable offering a longer fixed-rate term, and TIC owners, in turn, seem to be staying in their properties as long as condo owners do—-in many cases, beyond three or five years.
So for those who are wary about being exposed to a higher interest rate after an ARM adjusts in the future, a 30-year fixed TIC loan could be a good fit. Continue Reading