The Power of Recourse: Unveiling the Advantages of Recourse Commercial Mortgages

Apr 20, 2024

When it comes to financing a commercial property, there are various options available to borrowers. One such option that offers unique advantages is a recourse commercial mortgage. In this post, we will delve into the power of recourse and unveil the benefits that come with choosing this type of financing.

The Basics of Recourse Commercial Mortgages

A recourse commercial mortgage is a type of loan where the borrower is personally liable for repaying the debt. In the event of a default, the lender has the right to go after not only the property but also the borrower's personal assets to recover the remaining balance.

Advantages of Recourse Commercial Mortgages

Here are some key advantages of opting for a recourse commercial mortgage:

  • Lower Interest Rates: Lenders typically offer lower interest rates for recourse loans since the risk is lower for them.
  • Higher Loan Amounts: With the added security of personal liability, borrowers may be able to secure higher loan amounts than with non-recourse loans.
  • Flexibility in Underwriting: Lenders may be more flexible in their underwriting criteria for recourse loans, making it easier for borrowers to qualify.
commercial property mortgage

Is Recourse Right for You?

Before deciding on a recourse commercial mortgage, it's essential to consider your individual financial situation and risk tolerance. While the benefits can be significant, the personal liability aspect of recourse loans is a crucial factor to weigh.

How to Mitigate Risk

If you are concerned about the personal liability associated with recourse loans, there are strategies you can employ to mitigate risk:

  1. Asset Protection: Consider setting up legal structures such as LLCs to protect your personal assets in case of default.
  2. Insurance Coverage: Explore insurance options that can provide additional protection in the event of unforeseen circumstances.
commercial real estate

Final Thoughts

Recourse commercial mortgages offer a powerful financing solution for borrowers looking to secure funding for commercial properties. By understanding the advantages and risks associated with recourse loans, you can make an informed decision that aligns with your financial goals and objectives.