How Do 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 mortgage loan. The 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.
This type of loan is different from personal loans, auto loans, or any other money loan. For example, in the case of the car loan if the borrower defaults, the lender can seize the car.
In the event of default or foreclosure on the non recourse loan, the lender cannot take legal action or go after the IRA owner’s other assets. The lender can only seize the IRA asset. You can see why this would be an attractive option for Real Estate IRA Investors.
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.
