Fraction — Reverse Mortgage Alternative

What Is Fraction?

Fraction is a Canadian fintech company founded in 2021 that offers a shared-appreciation, no-monthly-payment mortgage. It is not a reverse mortgage. Unlike CHIP (HomeEquity Bank), Equitable Bank, Bloom Finance, and Home Trust — all of which require borrowers to be at least 55 years old — Fraction has no minimum age requirement and is available to any homeowner aged 18 or older.

Fraction appears in reverse mortgage comparisons because it solves a similar problem: it allows homeowners to access their home equity without making monthly mortgage payments. However, the underlying product structure is fundamentally different. With a reverse mortgage, you borrow at a fixed interest rate and never have to repay until you sell, move, or pass away. With Fraction, your interest rate is tied to how much your home appreciates, you have a fixed-term loan (typically 5 years), and you must repay the full amount at the end of the term.

Fraction is available in Ontario, British Columbia, and Alberta. It distributes both directly and through mortgage brokers.

How the Shared Appreciation Model Works

The defining feature of Fraction is its shared appreciation model. Instead of charging a fixed interest rate (like a reverse mortgage), Fraction ties your cost of borrowing to how much your home increases in value over the loan term.

Each Fraction product has a rate floor (the minimum you will pay regardless of what happens to your home's value) and a rate cap (the maximum you will pay even if your home appreciates significantly). In Ontario, the 5-year term has a floor and cap of 7.09%. In British Columbia, the 5-year floor is 8.72%.

Here is how it works in practice:

• If your home appreciates less than the floor rate, you still pay the floor. For example, if your Ontario home appreciates by only 3% per year but the floor is 7.09%, you pay 7.09%.
• If your home appreciates more than the cap rate, you only pay up to the cap. Fraction absorbs any appreciation above the cap.
• If your home appreciates at exactly the floor/cap rate, you pay that rate.

This is a fundamentally different risk profile compared to reverse mortgages. With a reverse mortgage from CHIP, Equitable Bank, Bloom, or Home Trust, your interest rate is fixed for a defined term (or for life with Bloom's Lifetime product). You know exactly what you will owe. With Fraction, your final cost depends on the real estate market — and while the floor and cap provide some certainty, the model exposes you to real estate risk in a way that reverse mortgages do not.

Key detail: Fraction's interest compounds daily, not semi-annually like Canadian reverse mortgages. Daily compounding produces a higher effective annual rate than semi-annual compounding at the same nominal rate. This means a 7.09% rate from Fraction compounds to more per year than a 7.09% rate from a reverse mortgage lender.

Products by Province and Term

All Fraction products require a minimum home value of $300,000 and are available to borrowers aged 18 and older. The maximum loan size is $1,500,000 per property and $2,000,000 per person. All advances are one-time lump sums — Fraction does not offer scheduled draws or income-stream products.

Notice that shorter terms offer higher LTVs: the 3-year Ontario product allows up to 49.5% LTV compared to 43% for the 5-year term. This is because Fraction's risk decreases with shorter exposure periods.

Fees and Costs

Fraction's fee structure is meaningfully different from — and generally more expensive than — reverse mortgage lenders:

• 2.5% origination fee — deducted from your loan proceeds (not paid out of pocket). On a $200,000 loan, this is $5,000.
• $400–$600 appraisal fee — paid out of pocket by the borrower. (Bloom pays for the appraisal; CHIP and Equitable Bank charge a similar amount.)
• $900–$1,500 legal fees — for independent legal representation.
• ~$2,000 conveyancing costs — for title registration and related legal work.
• 1% renewal fee — if you refinance with Fraction for another term at maturity.

The total upfront cost for a $200,000 Fraction loan is approximately $8,000–$9,000 (including the origination fee deducted from proceeds). By comparison, a reverse mortgage from Equitable Bank costs approximately $995 in setup fees, CHIP costs $1,795–$2,995, and Bloom costs approximately $2,300. Fraction's upfront costs are significantly higher than any Canadian reverse mortgage lender.

Repayment: The Critical Difference

This is the single most important difference between Fraction and a reverse mortgage, and it is the reason Fraction is not a reverse mortgage.

With a reverse mortgage from CHIP, Equitable Bank, Bloom, or Home Trust, you never have to repay the loan until you sell your home, move out permanently, or pass away. Your loan renews automatically at term end (typically every 5 years), and there is no mandatory repayment date. This is the defining feature of a reverse mortgage — it allows you to stay in your home indefinitely without making payments.

With Fraction, you must repay the full lump sum — principal plus all accrued interest — at the end of your term (typically 5 years). There are three ways to handle this:

• Refinance with Fraction — if you qualify, you can renew for another term and pay a 1% renewal fee
• Refinance with another lender — take a conventional mortgage or other product to repay Fraction
• Sell the home — use the sale proceeds to repay the loan

Fraction does not accept partial payments. You cannot pay down a portion of the loan during the term. You either repay the full amount at maturity or refinance. There is no prepayment penalty if you choose to repay early, which is a genuine advantage — but the mandatory full repayment at maturity is a structural risk that reverse mortgages do not carry.

For a 70-year-old or 80-year-old homeowner, this mandatory repayment requirement could create significant stress. If you cannot refinance (due to age, income, or market conditions) and do not want to sell your home, you have no option — the loan must be repaid. This is precisely why reverse mortgages exist: to remove this repayment pressure for older homeowners.

Fraction vs. Reverse Mortgage: Head-to-Head

The table above illustrates why Fraction is a fundamentally different product. The two features that make reverse mortgages uniquely valuable — open-ended terms with no mandatory repayment and the no-negative-equity guarantee — are both absent from Fraction. In exchange, Fraction removes the age barrier and the prepayment penalty, which are meaningful advantages for younger borrowers.

Neither product is universally better. The right choice depends entirely on your age, financial situation, risk tolerance, and how long you plan to stay in your home.

Who Is Fraction Best For?

Fraction is the right choice for borrowers who:

• Are under 55 and cannot qualify for a reverse mortgage — this is Fraction's primary advantage. If you are 40 or 50 and need to access home equity without monthly payments, reverse mortgages are not available to you. Fraction is.
• Are confident their home will appreciate modestly — because your rate is tied to appreciation, a flat or declining housing market means you pay the floor rate. If you believe your home's value will grow at or near the floor rate, Fraction can be cost-effective.
• Are comfortable with a 5-year term and full repayment at maturity — you must have a clear plan for repaying the loan (refinancing, selling, or another source of funds).
• Want no monthly payments but are not retirement-age — Fraction fills a gap in the market for working-age homeowners who are equity-rich but cash-poor.
• Own property in Ontario, British Columbia, or Alberta — Fraction is not available in other provinces.
• Want the flexibility to repay early without penalty — unlike most reverse mortgages, there is no prepayment penalty with Fraction.

Who Should Choose a Reverse Mortgage Instead?

A reverse mortgage is the better choice for borrowers who:

• Are aged 55 or older and want an open-ended term — with a reverse mortgage, you never have to repay until you sell, move, or pass away. There is no mandatory repayment deadline hanging over you.
• Want the no-negative-equity guarantee — all four Canadian reverse mortgage lenders (CHIP, Equitable Bank, Bloom, and Home Trust) guarantee you will never owe more than your home is worth. Fraction does not offer this protection.
• Do not want a mandatory repayment deadline — the 5-year repayment requirement is a structural risk that many retirees cannot or do not want to manage.
• Prefer rate certainty — with a reverse mortgage, your rate is fixed for the term (or for life with Bloom's Lifetime product). You know exactly what you owe. With Fraction, your final cost depends on real estate appreciation.
• Want the broadest product options — CHIP offers income-stream products, bridge financing (CHIP Open), and national coverage. Equitable Bank offers Canada's lowest rates. Bloom offers lifetime rate locks and a Prepaid Mastercard. Reverse mortgage lenders collectively offer far more product variety than Fraction's single lump-sum model.

See our full lender comparison to compare all four reverse mortgage lenders side by side, or take the lender quiz to find the best option for your situation.