How to finance fractional ownership

Published Date: October 30, 2023

Smiling young couple planning budget
Fractional ownership allows multiple individuals to purchase property together and share usage rights. It’s a common practice among people buying big-ticket items like second homes, investment properties, boats or planes. Because each party is only responsible for a portion of the full purchase price, fractional ownership can be a practical way to purchase and own an asset like a vacation home that might simply be too expensive on your own. Unlike timeshares, fractional ownership provides you with the benefits of actual real estate property ownership. If the value of your second home appreciates over time, your share appreciates proportionately to your ownership stake. Plus, you'll share expenses like repairs, insurance and taxes with the other owners.  While a lot of factors go into deciding if fractional ownership is right for you, one of the most important considerations is how you’ll pay for it. Here are a few options for financing fractional ownership of a second home. 

Types of fractional ownership financing


Of course, paying for your second home in cash is the most straightforward option — there's no financing application, no contingencies and, best of all, no monthly mortgage payment or interest charges. However, not all buyers have the amount of cash required to purchase shares in a property without financing. Luckily, there are a few other options. 


While not every bank or credit union offers mortgages for fractional ownership purchases, an increasing number do. It’s important to note that qualifying for a second home mortgage can be more difficult than qualifying for your first mortgage. You may need a higher credit score, longer employment history and a down payment of 20% or higher. If you’re buying in a new vacation community, the property developer may offer financing through a banking partner as a way to encourage purchases. 

Home equity 

If you already own a home and have a significant amount of equity, you may be able to tap into it to purchase your second home. There are three different ways to do this. Be sure to explore your options with your financial advisor, mortgage broker or accountant. 
  • Home equity line of credit (HELOC): A home equity line of credit is a revolving credit line secured by the equity in your home. A HELOC typically features a variable interest rate, but the rate is usually lower than home equity loans, credit cards or personal loans. 
  • Home equity loans: Similar to a HELOC, a home equity loan is secured by the equity in your existing home. But unlike a HELOC where you only pay interest on the money you draw, with a home equity loan, you take out a loan for a set amount, with a fixed repayment schedule. 
  • Cash-out refinance: A third option is to refinance your property for a higher amount than you owe, withdrawing the difference in cash. This option typically only makes sense if current interest rates are comparable or lower than the rate you have on your existing mortgage.  

Financing a Pacaso second home

Pacaso is a popular choice for fractional ownership of a vacation home. Our unique co-ownership model allows you to buy a ⅛ share or more of a fully furnished and professionally decorated second home in your favorite vacation destination. We set up a multi-member LLC and take care of the property management, interior design, scheduling and more.Buyers can pay for their co-ownership share in a few different ways. You can pay with cash, cryptocurrency, a HELOC or personal line of credit, or special financing. Through our banking partners, you can access competitive loan rates and enjoy a fast and easy application process. Financing of up to 70% of the purchase price is allowed.Want to find your dream vacation home? Explore our listings.

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Jen Lyons

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