If you’re looking to invest in commercial or multifamily real estate, finding the funds to purchase or refinance a property will play a significant role in your overall success. Although there are many ways to finance real estate investments, many buyers think that a full recourse loan is their only option. Many investors are not aware of the benefits of a non-recourse mortgage or that they even exist. The non-recourse loan is considered by many investors as their preferred form of financing.  As you consider your financing options, here are a few reasons why nonrecourse loans can be the perfect fit for purchasing or refinancing investment property.

3 Reasons to Obtain a Nonrecourse Loan

1. Reduced Collateral Risks

If a borrower defaults on a recourse or nonrecourse loan, their property may be seized by the lender to cover losses. In some cases, however, the collateral used to secure the loan may not carry a value sufficient to cover the debt.

When a real estate investor defaults on a recourse loan, the lender can cover the shortfall by seizing other assets from the borrower—such as other investment properties or personal assets. Under the terms of a nonrecourse loan, lenders can seize only the real estate financed with the loan. If sold at a loss, the lender loses money on the sale.

2. Personal Credit Isn’t a Determining Factor

If you opt to obtain a recourse loan, your credit score may have a significant impact on your approval. For some, this may mean failure to secure a loan or having to pay a higher rate of interest.

Nonrecourse loans, on the other hand, aren’t as dependent on your credit. Instead, the lender will determine if the value of the property is sufficient to secure financing. As a result, those with suboptimal credit may prefer this financing option.

3. No Global Finances Needed

Since the non-recourse loans are based on the property being financed, there is no need for global financials or personal tax returns. This makes getting the desired financing much quicker and easier. Also, with a non-recourse loan, spouses do not need to sign the mortgage documents.

Given the unique benefits of nonrecourse loans, they’re much more challenging to obtain. If you’re looking to purchase investment properties in the Des Moines, Cedar Rapids, Iowa City, Quad Cities, Dubuque, and Ames areas in Iowa, Howell Investment Financing offers various nonrecourse financing. Their financial specialist will introduce you to plans that offer security and predictability at competitive rates. Visit them online to learn more about their products and services, or call (515) 233-8228 to speak with a mortgage broker.