You’ve been approved and received your funds — so now what? Here's everything you need to know about managing your Fraction Mortgage.
Accessing your funds
Once your application has been reviewed and you have signed all the necessary documents, we will send you your money along with instructions to access the Fraction homeowner dashboard. Fraction can typically fund in less than 10 days. Learn more about our funding process here.
Once you receive the lump sum payment, the sky's the limit. You can invest in a home upgrade or repairs, start a new business or pay down existing mortgages or debts.
When do I pay off my balance?
Fraction is unlike your average home equity line of credit (HELOC). Although Fraction allows homeowners to make optional monthly payments, you can choose not to*. This means you can wait until the end of your term to pay off your balance, with no payments along the way. What you owe Fraction, in the end, is based on how much your home value goes up in those five years.
The draw period lasts for the first 18 months of your loan term. During this time, you are allowed to repay and redraw funds from your Fraction Mortgage. When the draw period ends, you enter the repayment period.
The draw period is a fixed amount of time during which you may "draw" on any funds you have already paid back. The draw period is available in the first 18 months of your term, which is up to 18 months.
Please note that when working with Fraction, your entire loan amount, minus the origination fee, is drawn once the funds have been transferred to your account.
A borrower cannot expand the amount they borrowed without refinancing. They can refinance at any time throughout the term, but they will incur additional fees, including Fraction's origination fee on the increased amount. Note that homeowners can only make additional draws if they've made prepayments.
Following the draw period, you will enter the repayment period. At this time, you will no longer be able to draw funds that may have been paid back during the draw period.
Want to pay your Fraction Mortgage back sooner? No problem. We do not charge repayment penalties. All prepayments will go toward your interest accrued, finance charges, then to the principal amount of your loan.
Your repayment period begins immediately after the draw period for the remainder of the term. If you choose to exit, you must pay back the loan principal, including any interest accrued.
Accessing the Fraction homeowner dashboard
To help homeowners keep on top of their finances, Fraction has built a handy dashboard that allows borrowers to review and access their funds and manage any payments on their schedule. Once the funds have been transferred to you from Fraction, you'll receive an email with instructions on how to set up and access your dashboard.
Reminder: while your Fraction funds can be used to consolidate debt and manage other loans, you do not have an escrow account with Fraction. You are responsible for paying your property taxes and homeowner's insurance.
Making payments via the Fraction Dashboard
Log into your Fraction dashboard to make payments, review balances, and manage your Fraction Mortgage. Prepayment requests can be made via ACH, Wire, or Check payments.
The Fraction dashboard allows you to:
• Connect your bank accounts from existing financial products
• Make one-time prepayments
• Make additional loan draws up until the repayment period begins
• Review and track current balances and payment statuses
Need more information on the Fraction Dashboard or prepayment and loan draws? Contact us today to learn more.
Determining the amount you pay back
A Fraction Mortgage interest rate is determined by the appreciation rate of your home, with a minimum and maximum rate. Review our current rates here.
With a Fraction Mortgage, our rates are variable, and when you are ready to repay your loan, the amount you pay back, including interest, is based on both the appreciated value of your home, and the Zillow Home Value Index (ZHVI) by zip code.
Fraction does an appraisal at the time of origination, and the final value is determined by the ZHVI by zip code. We pull the ZHVI for the zip code at the end of the term. When paying Fraction back, all payments you make on your Fraction Mortgage go first toward the interest, finance charges and then the amount of your loan. The amount of interest will be calculated on top of the principal balance at the end of your draw period.
Simple and compound interest
Depending on the state in which you reside, your interest rate will be calculated via either compound or simple interest. Here is a breakdown of the two:
The amount you pay back will be calculated annually on the amount that you owe. With mortgages and most car loans, simple interest accrues but does not compound, which results in you paying less at the end of your term. As a borrower, loans with a simple interest rate mean you'll only have to worry about interest added onto the outstanding principal balance. This method of interest rate calculation is standard in Washington State.
Compound Interest Any interest earned is added to the principal, forming a new base from which the next round of interest is calculated. This can accrue over many different periods: daily, monthly, or quarterly.
Exiting a Fraction Mortgage
Approximately 90 days before the expiration of your loan term, Fraction will send you a letter indicating that the loan is due soon.
During this time, up to 30 days before the end of the term, Fraction will work with you to determine how you plan to settle the Fraction agreement, be it through selling your home, a buyout, or renewing your Fraction Mortgage.
There are four potential exits to a Fraction Mortgage; sale, refinancing with Fraction, repayment of Fraction agreement, or default.
Any of these events may be triggered by preceding events, including:
• passing of all owners or occupants
• illegal activity
• deterioration of property
• or breach of Fraction Mortgage terms.
Selling your home
A home sale is a standard way for homeowners to exit their Fraction Mortgage. Since there are multiple considerations to a home sale, Fraction will work with you to determine the most straightforward path. There are specific pieces of documentation and processes necessary at this stage. Contact Fraction to learn more.
At the end of your term, you can choose to pay back your Fraction Mortgage without selling your home. At this time, Fraction will evaluate the property's present value via an appraisal and the ZHVI to determine the interest rate to be paid. Learn more about how we calculate home values here.
Renewing a Fraction Mortgage
If you have sufficient equity by the end of the loan term, you will have the option to refinance your Fraction Mortgage.
In the event of a renewal, you will repay the existing Fraction agreement and enter into a new Fraction Agreement.
To renew, the homeowner will need to have the home appraised again by a third party, paid for by the homeowner. Fraction will use the appraisal to determine the exit value for the existing Fraction agreement and the starting value for the new Fraction agreement. This agreement will feature new terms and updated minimum and maximum rates. All renewals are subject to a 1% refinancing fee.
Paying Fraction back
When paying Fraction back, all payments you make on your Fraction Mortgage go first toward the interest, finance charges, then the principal amount of your loan.
The amount of interest will be calculated on top of the principal balance at the end of the draw period. This benefits the borrower, as the total amount that the interest rate will be applied to decreases over time as you make more prepayments.
Your final payment amount will include the remaining balance on the loan, less the prepayments you made and the interest accrued. With a Fraction Mortgage, our rates are variable, and when you are ready to repay your loan, the amount you pay back, with interest, is based on the appreciated value of your home, based on the ZHVI by zip code.
A Fraction Mortgage does not have required monthly payments during the term. However, the homeowner may choose to pay off some or all of the balance at any time. You can pay Fraction back in full or via prepayments on the Fraction Dashboard.
The following payment methods are accepted:
• Preauthorized transfers
• Through the online portal (ACH)
What happens if I can't pay my Fraction Mortgage back?
The Fraction Mortgage is a loan secured by your home. If you fail to pay your loan amount back during the repayment period, you risk foreclosure.
If you think you'll have trouble repaying your loan, please contact Fraction immediately.
Maintaining your home
When you work with Fraction, you must ensure that you continue proper maintenance and upkeep of your home. Ultimately, you must ensure that the property remains in a similar condition to when the initial appraisal was completed and when you signed the Fraction Mortgage agreement.