The Advantages of New Construction Non Recourse Loans

Whether you’re planning new construction on a residential property, a condominium complex, or any other type of commercial project, new construction non recourse loans are among the most attractive types of financing options. Outlined below are some of the reasons why a non recourse loan for the construction of a new property is a good financing choice.

Secured by collateral; borrower not liable

Since a non recourse loan is secured by collateral, the borrower does not incur a personal liability on the loan. In most cases the real property serves as the only collateral. In the case of new property construction, the land will serve as collateral for the non-recourse mortgage. Since the lender is limited only to the value of the collateral pledged for the loan, the lender will not have any recourse on any of the borrower’s personal assets in case of loan default.

New construction non recourse loans are assumable

Most non recourse loans are also assumable, which makes the property easier to sell, should the seller choose to sell sometime in the future. Should there be losses on the sale of the property, non recourse lenders will not be able to sue the borrower. The only recourse of the lender in non recourse loans is to go after the collateral which has been already pledged on the loan.

Your credit worthiness counts

Non recourse financing is typically offered to borrowers who have excellent credit. Therefore, if you have excellent credit rating or if you have worked hard in keeping your credit score above average, your chances in getting approved for non-recourse financing is significantly higher. A new construction non-recourse loan, due to its unique nature, tends to follow stricter guidelines. However the borrower’s credit worthiness usually plays a huge role in the approval process, so that anyone with excellent credit history already has a fair advantage.

Ideal for residential projects

Non-recourse lenders typically offer these types of loans for residential projects such as the construction of multifamily properties, commercial complexes, which are primarily targeted to low income families, or senior citizens. Since these projects are expected to generate revenue, the lender faces lesser risk despite the “non recourse” nature of the loan.

These non recourse loans may also be ideal for refinancing, acquisition, and the rehabilitation of existing properties. Different lenders offer a range of financing programs, and non recourse loan rates tend to vary as well. Therefore, reviewing all options is important in obtaining the best financing to suit your particular needs.

With the advantages of non recourse loans it’s easy to see why many developers choose this type of financing for new property construction, rehabilitation, or refinancing projects. As a borrower, these non recourse loans not only allow you to protect your personal assets; their assumable nature also make the properties easier to sell in the future.