Difference between a recourse and non recourse mortgage

Many homeowners wonder what the difference is between a recourse and non recourse mortgage. The truth is both of these loans are very similar but have a few differences as well. The main difference is which assets your mortgage lender is allowed to come after the homeowner for, in the case of the home foreclosing.

Homeowners will always prefer non recourse mortgage, while your mortgage lender will prefer a recourse mortgage. Both of these types of loans will allow the mortgage holder to collect assets that the borrower used to secure the mortgage.

Many times, the asset the lender is referring to is the asset you obtained when purchasing the loan, your home. This means that in the event of the homeowner defaulting on their mortgage, the lender is legally allowed to foreclose on the property in order to pay off the debt.

So what is the difference between these two?

Non Recourse loan:

If the home goes into foreclosure and the loan is a non recourse mortgage, only the home can be seized by the lender to pay off the debt. Even if the home is not worth the balance of the loan, the lender must take the loss. The mortgage holder is not allowed to go after any other asset besides the property.

Recourse loan:

With this type of loan the foreclosure proceedings will typically be far worse for the borrower. Not only can the lender take their home, but they can go after other assets the borrower has obtained as well. They can also file a lawsuit to try and garnish the borrowers wages in order to pay off the debt.

So remember that the affects of a non recourse loan will have much less of a risk to the borrower in the event of a foreclosure. But there may be benefits for both.

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Moe Bedard
Founder at LoanSafe.org
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications. I currently live in Carlsbad, California with my beautiful wife and children.