So what do you know about non recourse mortgage loans and how they can be of a benefit to you? A non recourse mortgage loan is a secured loan, secured by collateral, usually real property. However, the borrower is not personally liable. If the borrower does default, the lender can seize the collateral, but that recovery is restricted to the collateral. A lender do nothing to recoup the debt beyond foreclosing on the property. The lender is not able to obtain a deficiency judgment, if the sale proceeds do not cover the entire debt. Because of this a non recourse mortgage loan is usually limited to 50% to 60% of the loan to value ratios.
Because of the risk of non recourse mortgage loans, they are often difficult to obtain and often have much higher interest rates. Borrowers on non recourse mortgage loans often reduce those costs by increasing the amount of the down payment or enter into a shorter loan term within the non recourse loan agreement.
Non recourse mortgage loans are generally used to finance commercial properties or other projects with very high capital expenditures, lengthy loan periods and other uncertain revenue streams. Non recourse mortgages or loans are also used for stock loans and other securities lend situations.
Additionally, the IRS requires non recourse mortgage loans for purchases of real estate the use leveraged self directed IRA funds. A self directed IRA allows the owner of the account to make investment and funding decisions about their retirements on their own. Additionally, using self directed IRA to buy real estate allows the owner to diversify their investment portfolio in a way they choose.
If you are considering a non recourse mortgage loan for either a home purchase or the purchase of commercial property, it is important to consult with your tax advisor. You should also find a mortgage broker or non recourse loan lenders who are completely knowledgeable about the implications and benefits of a non recourse mortgage loan.
While these non recourse mortgage loans and non recourse commercial loans may seem attractive, just as with any other mortgage or loan, you need to understand all of the implications that come with it. There are many benefits, but there may be tax implications that could preclude you from obtaining such a loan.
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