Potential buyers have received some good news about fractional ownership…

Until recently one of the main limitations of buying a fractional property was that potential purchasers had to fund their purchase with cash or by borrowing on another asset, such as their main home. Banks were not interested because they could not secure the whole property for resale in the event of a default.

FOC Finance and the Manchester Building Society have launched three schemes to help finance a fractional property:

Standard Euroflex - The Manchester Building Society provides a loan in euros for the purchase of the property, secured by a second legal charge on the UK residential property. The combined first mortgage and second charge loan cannot exceed 80% of the total value of the UK property. Euro mortgages are currently being offered over 25 year terms on a capital and interest basis or on an interest only basis at 1.5000% over Euribor 365 day rate (reviewed every 3 months).

Euroflex 2 – A loan provided in euros for the purchase of a property on a fractional ownership basis. The loan will be secured by a second legal charge against the UK residential property. In addition The Manchester Building Society also require a legal charge to be taken over the membership certificate. The combined borrowing on the first and second charge cannot exceed 95% if the total value of the UK property,. The product is offered at a rate of 1.6250% above Euribor 365 day rate (3 months).

Euroflex 3 – The Manchester Building Society will lend up to 60% of the purchase cost of the percentage of the overseas property being purchased and will be secured solely by a legal charge over the membership certificate. For example, a quarter share of a £400,000 property would mean the membership certificate has been bought for £100,000. The Manchester will in this case lend £60,000 –50% of the purchase price on an interest-only basis and the remaining 10% on repayment. Interest is charged at 2.6250% above Euribor 365 day rate (3 months).

New opportunity for developers

Richard Stoop, senior finance consultant of FOC Finance, says: “These new mortgage options are the first of their kind in the overseas investment market. UK homeowners are either able to borrow up to 95% of the value of their UK Property to finance a fractional ownership purchase. Alternatively, instead of raising the money from re-mortgaging a UK home, purchasers can borrow up to 60% on the fractional property price.”

Richard Stoop continues: “The benefits to developers are numerous. In countries where the market has softened particularly, fractional gives the developer another avenue to explore and being able to finance such purchases is vital to successful take-up. We recommend that developers begin by offering 10% of their properties on a fractional basis and then increase their exposure to this market once they see the benefits that it brings.”

FOC has over five years experience of the practicalities of implementing Fractional ownership. FOC continues to expand within Portugal and into Spain, Cyprus, Morocco, Florida, Egypt and the Caribbean.