The Pros and Cons of Non Recourse Loans
- Author Dave Lindahl
- Published October 3, 2010
- Word count 525
The Pros and Cons of Non Recourse Loans
There are no shortages of decisions to be made when it comes to real estate investment. Aside from all the purchasing aspects to be considered, there is the very important financial areas that must be addressed and dealt with which, of course, pertains to what funding you have, compared to what loans you must arrange.
Once you become involved in the financial arrangements for your prospective investment you are going to hear the term non-recourse loan. This is something that is going to be quite important to you and you will want to feel familiar with it to help you with your decision making.
Recourse and non recourse:
Perhaps if you have purchased a residence in the past, then you are probably familiar with the basic terms of the loan (mortgage). This is in reference to if you default on the payments the loan holder can seize your residence and sell it to recoup the balance of money owing on the mortgage. If the lender does not receive what is still owed plus costs incurred after selling the property, then you are still responsible for the balance owed. If this loan had been a non recourse loan then this would not be the case. This particular loan is a recourse loan.
Pros:
If it were a non recourse loan, then the lender would have to settle for whatever he sold the property for, and could not come back on you for any balance owed on the loan or additional expenses.
Cons:
Sounds like a great solution or protection for you as the borrower and it is, but there is a price to pay for this type of added protection.
To begin with you will have to do some shopping around to find a non recourse lender. As you can see the lender is at a bigger risk here, therefore not as many financial investors are willing to make this type of lending opportunity available.
You will most likely find when you locate a non recourse loan lender that the interest rates on this type of loan are going to be higher in order to offset the lender's risk.
Use your reasoning skills:
Using good reasoning skills though may help you take advantage of a non recourse loan and be able to reduce the overall cost of borrowing. For example, even if you are going to be paying a higher interest rate you can opt to make bigger or more frequent payments.
The important thing when doing any type of real estate transaction is not to develop tunnel vision either in the purchasing or financing segments of the venture. In other words, just because the interest rate is going to be higher on the non recourse loan, don't exclude its viability. Crunch the numbers and see what puts you in the most comfortable position for your real estate investment.
By getting yourself some basic real estate education and applying your newly found knowledge in this area in a very short time you will become a business realty investor, whether it be in one simple investment transaction or several.
David Lindahl, also known as the "Apartment King" has been successfully investing in single family homes and apartments for the last 14 years and currently owns over 7,000 units around the US. David regularly shares his secrets and experience on the same stage as Tony Robbins, Robert Kiyosaki, and Donald Trump!
Article source: https://articlebiz.comRate article
Article comments
Related articles
- BNPL vs Traditional Lending: Which Is the Better Option for Today’s Consumers?
- Personalized Loans 5 Things you Should Consider Before Applying
- Best Credit Card for Cash Back on Gas: Fuel Your Savings
- Mwananchi Credit Highlights The importance of Teaching Financial Literacy In Schools
- Porchlio's Rent Affordability Calculator: Your Key to Smart Renting
- What is SMB Funding?
- Cash USA | Quick & Easy Loans
- How Can a Private Loan Help Your Cash Flow Situation
- Business Line of Credit: A Lifeline of Your Financial Needs!
- Unsecured Small Business Loans in Australia
- Working Capital Loans: Everything you Need to Know
- Small Business Cash Advance Loans - Fast and Easy
- Things Not to Do When Building Business Credit
- Why Small Business Loans Do not Get Approved
- How to File Great West Life Benefit insurance Claim
- My encounter with the heartless corporate America @ChaseBank
- Are low doc home loans still available in Australia?
- Think Due Diligence Before Acknowledging That Loan Offer
- Tie Up Your Financial Loose Ends! The Importance of Managing High-Interest Loans
- Understanding cash flow vs. asset-based business lending
- Debt Consolidation Loan or Debt Counselling in South Africa
- Credit cards with bad credit wired to a prepaid debit card
- Insurance Financial Producers Articles - A Superstar Success Story Cannot Teach Me Anything
- Three Quick Tips From the Canada Revenue Agency on Tax Filing
- How Crypto Loans Work
- 4 Reasons why it is Beneficial to make a Down Payment for your Car
- Is the Process of Buying a Car Worth your Time?
- How to Consolidate Credit Card Debt During Covid-19
- Conglomerate Merger: Pros & Cons
- Signs That You Are Doing Budgeting Wrong