Overview

In urban areas such as San Francisco and Berkeley, TIC (Tenants in Common) properties have emerged as a popular way to make home ownership more affordable for first-time buyers.

• TIC partnership formed by group of people purchasing 2 or more units where each owner (or family) will occupy one of the units.
  
  
• Most owners plan to convert to condominiums at a later date.  (See the Condo Conversion Checklist.)
  
  
• In the meantime, each person owns a fractional share of the entire building – that share is based roughly upon the value of the individual unit.
  
  Eg., if 3 people buy a building for $1,200,000, each unit is valued at approximately $400,000 and each would own a 1/3 interest in the entire building.
  

Group TIC Loans

• TIC group obtains one mortgage on the entire property and must qualify together as a group; i.e., all income, assets and debts are lumped together for purposes of qualification.
  
  
• Each owner is liable for the entire mortgage, but the TIC agreement protects the owners from many common risks of joint ownership.
  
  
• Difficult to predict if you will qualify to purchase a TIC unit without knowing the other potential owners' finances -- income, assets, debts and FICO scores must be considered together.

If one party needs to sell before the conversion is completed, all owners must refinance to bring in a new owner, or the loan must be partially assumable.


Fractional TIC Loans

Individual, or fractional, loans are now available for TIC units.  They require a down payment of 20% and each owner must qualify for the individual loan.  Stated income loans are not permitted.  The rates on individual TIC loans are about 1% higher than for group loans.

Example:  Group Loan:  5/1 interest only ARM at 6.125%, 0 points with no prepayment penalty; Fractional Loan:  5/1 interest only ARM at 7.25%, 1 point, with a 3-2-1 prepayment penalty.

I can help with the entire TIC financing process, including refinancing the individual units once your conversion is complete.