Fraction — Shared Appreciation Mortgage

What Is Fraction?

Fraction is a Canadian financial technology company founded in 2021. It offers a product that looks similar to a reverse mortgage — you borrow against your home equity without making monthly payments — but the underlying mechanics are fundamentally different. Fraction uses a shared-appreciation model, not a fixed-rate mortgage.

The key differences from a reverse mortgage are:

• No age requirement: Fraction is available to homeowners 18 and older. Traditional reverse mortgages in Canada require the youngest borrower to be at least 55.
• Minimum credit score: Fraction requires a minimum credit score of 550. Regulated reverse mortgage lenders have no minimum credit score requirement.
• Mandatory term end: Fraction has a fixed term up to 5 years. At term end, the full balance is due — you must sell, refinance, or renew. Reverse mortgages have no mandatory end date as long as you live in the home.
• Shared-appreciation rate: Your effective interest rate is not fixed — it is tied to your home's actual appreciation, with a floor and a cap. Rates are indexed to CORRA Swap rates rather than Bank of Canada prime.
• No no-negative-equity guarantee: If your home loses enough value, you could owe more than it is worth. All regulated Canadian reverse mortgage lenders guarantee this cannot happen.
• Daily compounding: Fraction compounds interest daily, not semi-annually like Canadian regulated reverse mortgages under the Interest Act.

How the Shared Appreciation Model Works

Instead of a fixed interest rate, Fraction's return is tied to your home's appreciation:

• There is a rate floor — the minimum effective rate you will pay, regardless of how your home performs. For example, the Ontario 5-year product has a floor of 7.29%.
• If your home appreciates, Fraction earns a share of that appreciation as part of its return. This means your effective cost increases as your home value increases.
• There is a cap on Fraction's upside — you do not pay an unlimited rate, even in a strong housing market.

This model is designed to align Fraction's incentives with yours: if your home does not appreciate, Fraction earns only the floor rate. If it appreciates strongly, Fraction participates in that upside — but you also benefited from the no-monthly-payment equity access.

The practical implication: In a flat or declining market, Fraction's effective cost is close to the floor rate. In a rising market, the effective cost increases. Borrowers who believe their home will appreciate modestly should model the appreciation scenario carefully before choosing Fraction over a conventional reverse mortgage.

Rates and Products

Setup costs: Origination fee starting at 1% plus approximately $900–$1,500 in legal fees, $400–$600 for appraisal, and approximately $2,000 for conveyancing and title insurance. On a $400,000 loan at 1% origination, the fee is $4,000 — still significantly higher than the flat $995 charged by Equitable Bank and Home Trust. Larger loans incur a higher origination fee percentage.

Maximum loan size: $1,500,000 per property; $2,000,000 per person. This makes Fraction one of the only equity-access products for very high-value urban properties.

Mandatory Repayment at Term End

This is the most important feature distinguishing Fraction from a reverse mortgage: the full balance is mandatory at the end of the term. Fraction terms range from 3 to 10 years.

At term end, you have three options:

• Sell the home and repay from proceeds
• Refinance with another lender (subject to qualification at that time)
• Renew with Fraction if they offer a renewal product — not guaranteed

This creates what financial planners call "refinance risk" or "rollover risk." If your financial situation has changed, if you cannot qualify for refinancing, or if Fraction does not offer renewal on favourable terms, you could be forced to sell your home at term end — the exact outcome most reverse mortgage borrowers are trying to avoid.

Reverse mortgages have no such risk. With CHIP, Equitable Bank, Bloom Finance, or Home Trust, you cannot be required to repay the loan as long as you live in the home, maintain the property, pay property taxes, and keep insurance current.

No Prepayment Penalty

Fraction does not charge a prepayment penalty — you can repay the balance in full at any time without cost. This is an advantage over CHIP (which has penalties within the 5-year term), Equitable Bank (penalties within term), and Bloom (steep 8% Year 1 penalty for non-life-event exits).

However, repayment must be in full — Fraction does not accept partial payments.

Daily Compounding

Fraction compounds interest daily. All four regulated Canadian reverse mortgage lenders compound semi-annually (twice per year) as required by the federal Interest Act. Daily compounding results in higher effective interest costs than semi-annual compounding at the same nominal rate.

This is not a small difference over longer time horizons. At a 7% nominal rate, daily compounding produces an effective annual rate of approximately 7.25%, while semi-annual compounding produces approximately 7.12%. Over a 5-year term on a $200,000 loan, the difference adds up to thousands of dollars.

Fraction vs Reverse Mortgage — Side-by-Side

Who Is Fraction Best For?

Fraction is a legitimate product for a specific, narrow profile:

• Homeowners under 55 who cannot access a reverse mortgage and need equity access without monthly payments
• Borrowers with a clear exit strategy at term end — such as selling the home within 3–5 years, expecting an inheritance, or planning to downsize
• Urban property owners in ON, BC, or AB (Fraction is urban-only)
• Borrowers who believe home appreciation will be modest — keeping the effective cost near the floor rate

Fraction is not appropriate for borrowers who:

• Plan to stay in their home long-term (the mandatory term end creates risk)
• Are aged 55+ and prefer the certainty and consumer protections of a regulated reverse mortgage
• Cannot tolerate the scenario of being required to sell or refinance at term end
• Want a no-negative-equity guarantee

If you are 55 or older and considering your options, use our free calculator to estimate how much you could access through a regulated reverse mortgage instead. Learn how reverse mortgages work to understand the key differences. Reverse mortgage proceeds are tax-free and do not affect OAS, GIS, or CPP — an advantage Fraction does not replicate. For the impact on what your heirs inherit, see the inheritance impact guide.

How Fraction Compares to Reverse Mortgages

For eligible borrowers (55+) in Ontario, BC, or Alberta, the four regulated reverse mortgage lenders — CHIP, Equitable Bank, Bloom Finance, and Home Trust — offer substantially better consumer protections: no mandatory term end, no-negative-equity guarantee, federally regulated oversight, and semi-annual compounding under the Interest Act.

Fraction's only clear advantage for eligible reverse mortgage borrowers is the absence of a prepayment penalty. If you have a clear exit strategy within a few years, Fraction's no-penalty structure could save money compared to a CHIP or Equitable Bank early exit. But for long-term retirement planning, a reverse mortgage is almost always the more appropriate product.

See our full side-by-side comparison, alternatives guide, or take the lender quiz to find your best match.