Non-Recourse Mortgage
What Does Non-Recourse Mortgage Mean?
A non-recourse mortgage is a loan secured by collateral, typically real estate, where the borrower is not personally liable for repayment beyond the value of the pledged property.
Insuranceopedia Explains Non-Recourse Mortgage
If a borrower defaults on a non-recourse mortgage, the lender is entitled to seize and sell the collateral. However, if the sale does not cover the full loan amount, the lender cannot pursue the borrower for the remaining balance.
Non-recourse mortgages are typically limited to loan-to-value ratios of 50% to 60%, ensuring that the property used as collateral provides sufficient security for the loan. Lenders writing these loans normally require the borrower to maintain homeowners insurance on the property for the life of the mortgage, since that property is the only asset they can recover from in a default. Borrowers closing on one of these loans often compare the top-rated homeowners insurance companies to find coverage that meets the lender’s requirements.
