When you’re looking for a way to finance your commercial property, you’ll come across many different loan options. If you choose to fund your building through HUD financing, you’ll need to understand the term “non-recourse loan”. At Howell Investment Finance in Ames, IA, their experienced brokers want to inform you about what’s involved in financing investment properties. Here, they explain what a non-recourse loan is and why it matters to business owners seeking HUD financing for their project.

What Is a Non-Recourse Loan?

A non-recourse loan refers to a loan backed by collateral. For most business owners financing an apartment mortgage or construction loan for a commercial property, the property itself becomes the collateral. This means if you fail to make payments or default on the loan, the lender can take possession of the property to settle the debt.

Why Should You Choose a Non-Recourse Loan?

If you’re seeking HUD financing for a project, non-recourse loans are the only ones available. Unlike traditional loans, non-recourse loans have a fixed interest rate, guaranteeing you a single monthly payment which will not change throughout the year. This helps you establish a firm budget and makes your expenses more predictable when you’re first starting out. Non-recourse loans from HUD further protect you from financial liability to the lender should you default on your loan.

If you default on a non-recourse loan, the only thing the lender can take from you is the property. Even if the property value falls below the loan amount, your lender cannot take legal action or sue you for any remaining balance on the loan. This means you’ll never have to worry about expensive settlements or continued payments after you default. For many business owners, this is seen as a benefit, especially in times of economic uncertainty.

If you’re interested in learning more about non-recourse loans or securing funds through HUD financing, contact Howell Investment Finance today. Visit their website for more information and call (515) 233-8228 to speak with a broker about your project.