Financing Alternatives

All Cash 

According to industry research, most fractional buyers pay in cash, using a variety of resources including a home equity loan on their main residence. The IRS has determined that the loan costs for buying fractional properties can be deductible via a HELOC, so long as the loan doesn't exceed $100,000. (see IRS Publication 936)

New Mortgage

Your dream of a fractional second home can be financed, since there is a national lender designed specifically for fractionals. Fractional loans for a secondary residence will carry slightly higher interest rates and require a larger down payment than a loan for a primary residence. MWSH will refer you to fractional lenders located nearby in Florida, and also in selected other states.

Tax Strategies 

You may have downsized to a smaller home recently, are ready to travel, and would like to use part of your tax sheltered gain to buy a second vacation home. The second-home market has been helped by the Taxpayer Relief Act of 1997, which established new rules for the treatment of a capital gain on a principal residence. The amended U.S. tax code moved from encouraging progressively larger and costlier homes to permitting downsizing from larger homes to buy a smaller, less expensive primary home and then using the tax-sheltered gain elsewhere, including making a down payment on second home used as a recreational property.  In short, the "downsize and add a second home strategy", propelled by tax-free money, can be helpful to fractional buyers.

In March 2002 an IRS ruling permitted real interest in property known as a tenancy in common, or “TIC” can qualify for tax deferrals under Section 1031 of the Internal Revenue Code. This means that people wanting to exchange into a vacation fractional can do so, and those wanting to sell have the opportunity of the entire 1031 exchangers’ market available to them.

Please seek assistance from a qualified tax professional for your individual situation.