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Canada-based Fraction brings HELOC product to US

Fraction, a Canadian proptech that helps homeowners access their property’s equity, is planting roots in the U.S. – starting with Washington State.

The company’s first launch in America’s Northwest corner comes on the heels of its $228M USD debt-equity funding announcement, 2021 Series A, and success in the Canadian market, with the new capital being used to fuel Fraction’s US expansion.

Founded in 2018, Fraction’s bread-and-butter lies in its proprietary HELOC product.

Just like a credit card, a home equity line of credit (HELOC) is a revolving line of credit you can use to pay for home repairs or other expenses. So you’ll only have to pay off what you spend, unlike a loan that would require you to pay off the full amount of the lump sum you receive upfront. 

According to recent data from D.C. think tank the Urban Institute, the US has approximately $26.9 trillion dollars in home equity available, with $670 billion of that located in Washington State alone.

This style of loan isn’t new, in fact, its offered by many of the U.S.’ lending giants like Bank of America, Flagstar and PNC. However, there are proptechs that specialize solely in helping access and repackage homeowners equity, like Point, Unison and Hometap.

Figure, the blockchain lending startup cofounded by former SoFi CEO Mike Cagney, offers a product that is an alternative to federally regulated HELOC loans, but also has launched a product that buys a home from an owner and then leases it back to them.

According to Fraction, however, the company has taken a more holistic approach to tapping into the equity line. Fraction’s “Appreciation Mortgage” requires no monthly payments and doesn’t require any repayment for up to 10 years. There are also no prepayment fees if a homeowners wants to pay off the HELOC quicker.

Fraction’s Appreciation Mortgages also fall under the first lien category, making it an option to replace a homeowner’s mortgage while also having access to all their equity, not just the amount of a smaller second mortgage HELOC.

The proptech also claims its tech is fast, like, really fast. According to Fraction, its automated underwriting system (AUS) speeds up the application processing by up to 10x.

Once homeowners access their equity, they can use the cash for anything, from paying off credit-card debt to starting a business to buying a second home. When the term ends, the house sells, or the homeowner exits the loan and Fraction is paid based on the appreciated growth of the home.

“Fraction’s HELOC is the innovative and tech-forward loan option that American homeowners need to live and age well, giving them access to fairer alternatives for securing investment capital or solving the problem of being house rich but cash poor,” said Hayden James, CEO and co-founder of Fraction.

Fraction also noted it will launch in additional states by the end of 2022.

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