There are more tenancy-in-common (TIC) lenders than ever these days, and they’re offering interest rates that ace out their condo counterparts in some instances.
Tenancy-in-common (TIC) units are never buyers’ first choices, because they’re a more complicated and cumbersome form of property ownership. (Check out this past post for a TIC primer.) But TICs typically cost anywhere from ten to twenty percent less than condos, depending on location, size and amenities. So they’re worth considering if you can’t afford what you need in a condo.
There have traditionally been only a few lenders offering TIC loans. That’s never put the consumer in the driver’s seat by any stretch due to limited loan options. However, there are currently eight different lenders that will do TIC loans:
Sterling Bank & Trust
Bank of Marin
Bank of San Francisco
Redwood Credit Union
Patelco Credit Union
One big ground rule for TICs: Lenders generally offer adjustable-rate loans, with the exception of a few that offer 30-year fixed loans. A popular option is the seven-year fixed, with the assumption being that you probably will want to trade up to a condo or house and won’t be sticking around waiting for the seven-year loan to adjust. (I mean, sharing title with multiple owners is okay for a time, but you eventually will want to be a little more independent.)
These lenders vary by how much of a down payment they require, the fees they charge, and whether they might pay for things like an appraisal report. Interest rates for a seven-year ARM can be well under four percent if you have 25% down. Some lenders also require updates to a group’s TIC agreement, which is something I had to navigate in a recent transaction. Ask your Realtor to confirm these sorts of details with your chosen lender(s) so you can put yourself in position to avoid potential delays and costs.
Now is a good time to consider a TIC purchase if you’re a buyer considering transitioning from renting to owning your first home in a good San Francisco location. Consult with a knowledgeable Realtor who handles TICs and can hook you up with his or her best contacts at the available TIC lender offices. It is definitely worth shopping around among the eight lenders to see which one will be the best fit with your financial situation.
[Special thanks to my colleague Anthony Koutsos at Keller Williams for providing TIC updates on Top Agent Network.]