Clear House Lending connects real estate investors and developers with the right lender from our network of 6,000+ private capital sources. Bridge, DSCR, SBA, hard money, and construction loans -- most borrowers get term sheets within 48 hours.
Understanding personal liability is critical to protecting your assets. Learn how these loan structures affect your risk exposure.
Key Takeaways
Understanding the difference between recourse and non-recourse financing is essential for protecting your personal assets. The right structure depends on your loan size, risk tolerance, and the property type.
$929B
total commercial and multifamily mortgage originations in 2023
Source: Mortgage Bankers Association
6,000+
commercial lenders in Clear House Lending's network
Source: Clear House Lending
$4.7T
total commercial and multifamily mortgage debt outstanding
Source: Federal Reserve
50 states
nationwide coverage for commercial real estate financing
Source: Clear House Lending
With a recourse loan, you personally guarantee repayment. If the property is foreclosed and sold for less than the loan balance, the lender can pursue your personal assets (savings, other properties, etc.) to recover the remaining debt.
With a non-recourse loan, the lender's recovery is limited to the property itself. If the property is foreclosed, the lender cannot pursue your personal assets to cover any shortfall (with important exceptions called "carve-outs").
| Feature | Recourse | Non-Recourse |
|---|---|---|
| Personal Liability | Full personal guarantee | Limited to property* |
| Interest Rates | Lower rates | Higher rates (+0.25-0.50%) |
| Down Payment | May be lower | Often higher (25-35%+) |
| Borrower Requirements | More flexible | Stricter (net worth, liquidity) |
| Property Requirements | More flexible | Stabilized, quality assets |
| Minimum Loan Size | No minimum | Usually $1M+ (often $3M+) |
| Common Loan Types | Bank, SBA, Hard Money | CMBS, Agency, Life Co. |
*Non-recourse loans include "bad boy" carve-outs that can trigger personal liability for fraud, misrepresentation, or certain prohibited actions.
Non-recourse loans include carve-outs that can trigger full personal liability. Common carve-outs include: fraud or misrepresentation, misappropriation of funds, voluntary bankruptcy filing, environmental violations, and failure to maintain insurance. Even with non-recourse loans, maintaining proper management is essential.
Non-recourse financing is typically available from:
Beyond choosing non-recourse financing, consider these additional protections:
Clear House Lending can help you navigate recourse and non-recourse options based on your property, loan size, and risk tolerance.
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