Self Directed IRA Non-Recourse Loans to Invest in Real Estate

How to Get a Loan For Your IRA.

What is an IRA Non-Recourse Loan?

A non-recourse loan is a loan where the IRA account holder is not personally liable. The loan is to the IRA not the individual IRA owner and it is secured by collateral, usually real estate. In the event of foreclosure or default, the lender can only pursue the IRA assets. Because it is a higher risk loan for the lender, the interest rates are typically higher. 

How Non-Recourse Loans Work

When you have a small IRA or just don’t have enough funds to invest in real estate, your IRA can get a non-recourse loan. A non-recourse loan is a loan in the name of the IRA, secured by collateral (usually the property being purchased). The loan is based on the value of the real estate investment and typically the IRA holder's credit does not come into play for the IRA to qualify in most cases.

How do I get a non-recourse loan for my IRA?

Most banks do not offer these types of loans. You must shop around for a non-recourse IRA lender, as every lender has different requirements, restrictions, and terms. Here is a more detailed article on what non-recourse lenders require.

Finding the Right Lender

There are many things to consider when obtaining a non-recourse loan such as IRA taxes. Here are some basic questions to ask when researching non-recourse lenders:

  • What are the terms? Do they change?
  • What is the LTV?
  • How do you calculate the cash flow projection?
  • What is your formula?
  • How is rent determined?
  • Do you require a credit check for me personally?
  • What are your fees? How do you charge?

Visit our SDIRA Professionals Network page to learn more about non-recourse lenders.

4 Easy Steps to Get Started With a Non-Recourse Loan

We always recommend that you open and fund your account before starting the process. Moving funds from one custodian to another can take time and may delay your purchase.

Here are some easy steps to get started:

1. Open and fund a self-directed IRA. You will need to provide the lender a statement for your IRA.

2. Find a non-recourse lender. Remember, this is a loan to your IRA— therefore, once you have approved the loan terms, IRAR Trust signs all documents on behalf of your IRA.

3. Fund the investment. For IRAR Trust to fund the investment, we’ll need a copy of the loan documents, as well as the investment paperwork. You can find more information on the process for buying real estate with a non-recourse loan on our blog.

4. Set up payments to non-recourse lender from your IRA. The payments must come from the IRA. You cannot pay personally.

Non-Recourse Loans FAQs

What is a non-recourse loan? 

A non-recourse loan is a loan where the IRA account holder is not personally liable. The loan is to the IRA not the individual IRA owner and it is secured by collateral, usually real estate. In the event of foreclosure or default, the lender can only pursue the IRA assets. Because it is a higher risk loan for the lender, the interest rates are typically higher. 

Where can I find non-recourse lenders? 

Most banks do not offer non-recourse loans. You must shop around for a non-recourse IRA lender, as every lender has different requirements, restrictions, and terms. Here is a list of non-recourse lenders.

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