Eyeing a TIC in San Francisco but unsure how fractional loans work? You are not alone. TICs can open doors to great homes, but the financing plays by different rules than a typical condo mortgage. In this guide, you will learn what a TIC is, how fractional loans are structured, the key risks and city rules to know, and a practical checklist to move forward with confidence. Let’s dive in.
TIC basics in San Francisco
What a TIC is
A tenancy in common, or TIC, is a way for two or more people to own undivided fractional interests in the same property. In San Francisco, the term also commonly refers to a specific apartment-style unit that you occupy under an exclusive-use right tied to your percentage interest. If you want a quick primer, this overview of what a San Francisco TIC is explains the structure and how it differs from a condo (source).
Why financing is different
Traditional condo loans rely on Fannie Mae or Freddie Mac guidelines and a large secondary market. Fractional TIC loans are usually non-conforming, which means they do not fit those standard programs and are typically kept on the lender’s books. That difference often leads to fewer loan choices and more conservative terms than a comparable condo mortgage (non-conforming overview).
How fractional TIC loans work
Separate mortgages and collateral
With fractional TIC financing, each co-owner gets an individual mortgage for their percentage interest. Your promissory note and deed of trust are secured only by your fractional ownership and your exclusive right to occupy your unit. Lenders underwrite and record each loan separately, which keeps liabilities siloed among co-owners (legal overview of individual TIC financing).
What happens if someone defaults
If one owner defaults, the lender’s remedy is limited to that owner’s fractional interest. In practice, the lender can foreclose on the defaulting share without taking the entire building. This structure is the key reason modern TICs became more marketable in San Francisco (background on the rise of fractional loans).
Loan features and borrower expectations
Product types and pricing
Most fractional TIC loans are portfolio products. Lenders may offer adjustable-rate structures or fixed periods that later adjust, and fully amortizing fixed options can be more limited. Because the loans are non-conforming, rates and program fees are often higher than standard condo loans (non-conforming overview).
Down payments, reserves, and caps
TIC lenders tend to be conservative on loan-to-value, reserves, and documentation. You should be prepared for larger down payments, post-close reserve requirements, and program caps on loan size. Review an example of a local bank TIC program to understand common parameters and eligibility items (example lender program).
Lenders in the SF TIC market
The lender pool for fractional TIC loans is specialized and relatively small. Local and regional institutions, as well as certain credit unions, have historically offered these products. Program availability changes, so it is smart to confirm which lenders are actively originating today and what each requires (example lender program).
City rules that affect financing
DRE public reports
Some TIC offerings fall under the California Department of Real Estate’s public report process. A Preliminary Public Report, often called a Pink Report, can allow pre-marketing with refundable reservations, while a Final Report is typically required before closings in covered scenarios. These reports can add time, cost, and specific disclosure or reserve requirements, so verify whether a report applies to your transaction (California DRE public report guidance).
Condo conversion limits
San Francisco places strict limits on condominium conversions. Many TICs cannot convert easily, which can affect long-term value assumptions and financing options. Before you factor in potential conversion, review the city’s current program restrictions and your building’s history (San Francisco condo conversion restrictions).
Risks and tradeoffs to weigh
Shared costs still remain
Fractional loans separate mortgage liability, but co-owners still share common obligations like property taxes, insurance, reserves, and building maintenance set by the TIC agreement. If a co-owner falls behind on shared assessments, the shortfall can create pressure on others while remedies play out. Make sure you understand how costs are allocated and enforced in your TIC documents (individual TIC financing overview).
Title and legal considerations
Title companies and lenders will closely review the TIC agreement, exclusive occupancy description, and any subdivision-related approvals. TIC agreements also address dispute resolution and seek to reduce partition risk, but partition remains a legal possibility that you should evaluate with counsel. If your project needed a public report, build the timing and cost into your plan (legal restrictions and approvals).
Buyer and seller checklist
- Get the full TIC agreement. Confirm house rules, cost-sharing, voting, and dispute resolution. Highlight any default remedies and assignment or resale rules (individual TIC financing overview).
- Verify how your unit is described on title. Confirm your percentage interest and your exclusive right to occupy the specific unit.
- Ask lenders for current program details. Clarify allowed occupancy types, rate structures, origination or program fees, LTV caps, reserve requirements, and any loan size limits (example lender program).
- Confirm DRE status. Determine whether a Pink or Final Public Report applied, and whether any conditions still affect your sale or closing timeline (DRE public report guidance).
- Check condo conversion feasibility. Review city restrictions and your building’s history before assuming future conversion potential (SF conversion restrictions).
- Budget for shared costs. Review HOA or TIC financials, reserves, insurance, and recent or planned assessments so you know your true monthly and annual costs.
What this means for your plan
Fractional TIC loans can make San Francisco homeownership possible at price points where condos are scarce. The tradeoff is a specialized loan, a smaller lender pool, and more documents to review. With the right team, you can navigate the details and buy or sell with clarity.
If you want a step-by-step path tailored to your goals, connect with Suzanne Garcia. You will get hands-on guidance, introductions to TIC-savvy lenders and attorneys, and a clear plan from first tour to closing.
FAQs
What is a TIC in San Francisco?
- A TIC is shared ownership of one property where you hold a percentage interest plus the exclusive right to occupy a specific unit, which differs from owning a separate condo parcel (learn more).
How do fractional TIC loans work for buyers?
- Each co-owner gets an individual mortgage secured only by their fractional interest and occupancy rights, and a default affects only that share (details).
Why are TIC mortgage rates often higher than condo rates?
- Fractional TIC loans are usually non-conforming portfolio products with fewer investors, which can mean higher rates and fees than standard conforming condo loans (overview).
Which banks offer fractional TIC loans in San Francisco?
- A small set of local and regional lenders participate and programs change, so check current options with an example local bank TIC program as a reference point (program example).
What city rules could delay a TIC sale or closing?
- Some offerings require a California DRE public report and San Francisco imposes strict condo conversion limits, both of which can add time and conditions to a transaction (DRE guidance, SF restrictions).
