A non-recourse loan is a type of financing where the lender's only remedy in the event of default is to seize the collateral property, meaning the borrower's other personal assets are protected.
Non-recourse loans are less common in residential real estate and more typical in commercial deals, but they are worth understanding in the context of co-ownership. With a non-recourse loan, if the borrower cannot make payments, the lender can take the property but cannot pursue the borrower's bank accounts, other real estate, or personal assets. The tradeoff is that non-recourse loans typically carry higher interest rates and stricter qualification requirements because the lender takes on more risk.
GoForth, a luxury co-ownership company, structures each property under a dedicated LLC, which already provides a layer of liability separation between the property and the personal assets of the four co-owning families. While individual financing arrangements vary, GoForth's team can help connect owners with lenders who understand the LLC structure and offer terms appropriate for fractional ownership. This guidance ensures owners make informed financing decisions that align with their personal financial goals.