Non-Recourse Definition

Non-recourse is a type of loan where the lender will not pursue the borrower, personally in case of default. The lender’s only remedy is the property being financed or the property being used as collateral.

However, non-recourse loans usually have clauses (also known as carve outs) in them that would convert the loan into a recourse loan. These standard carve outs include fraud and misrepresentation.

This type of loan is desirable for most commercial borrowers because they won't have to personally gurantee the loan (which means it won't show up on their credit report).

Why is this important?

Because you aren't limited to the number of properties you can own. In the residential market, investors can't obtain anymore loans if they have a certain amount of loans (normally around 10 loans) already in their name.

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