The basic difference
A recourse loan lets the lender pursue the guarantor's personal assets if the collateral doesn't cover the debt after a default. A non-recourse loan limits the lender's recovery to the property itself, with narrow 'bad boy' carve-outs for fraud or misconduct.
Where each is common
Construction and land loans are almost always full recourse because the collateral doesn't exist yet or is unfinished. Stabilized income-producing assets — bridge, permanent multifamily, and larger commercial deals — are where non-recourse structures become available.
What lenders want in exchange for non-recourse
Non-recourse pricing and terms come with tradeoffs: lower leverage, higher debt yield requirements, and stricter carve-out language.
- Lower LTV/LTC than a comparable recourse loan
- Stronger sponsor net worth and liquidity covenants
- Carve-outs for fraud, environmental issues, and bankruptcy
Partial recourse and burn-off
Some lenders offer partial recourse that burns off (reduces or disappears) once the project hits a stabilization milestone like a certificate of occupancy or a debt-service coverage threshold.
How to think about your appetite
Tell us your true recourse appetite early. It's one of the biggest factors in which lenders we approach, and mismatched expectations here are the most common source of frustration late in a deal.