Are Apartment Loans Non – Recourse
While financing your multifamily property you may go for a non- recourse loan if your property meets some criteria. A non- recourse loan is a financing option in which the borrower and his personal properties are protected from action taken by the lender in case of a default.
If you had taken a non- recourse loan for the purchase of your apartment building and you have defaulted in paying back the loan, the lender can proceed only against the apartment building and in case he is not able to realize his full loan amount he cannot proceed against you personally or against your other properties to make good the loss.
Most of the Fannie Mae and Freddie Mac multifamily loans CMBS financing, mezzanine loans, life company loans, and HUD multifamily loans are generally non-recourse financial instruments.
As such the non- recourse loans are advantageous to the borrower, but these types of loans come with strict loan terms and more rigid underwriting procedures. These non- recourse loans are usually extended for a longer-term than other types of loans and hence may not be suitable for short term investment strategies.
So, while looking for financing your apartment building purchase look for various options and select the non- recourse type of loan if you want protection for your personal properties and save you from personal liability.