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With both banks and other lending institutions eager to provide apartment financing, new options have emerged in recent years. Generally smaller banks and other lending sources like direct lenders have a greater degree of flexibility in their loan-offering lineup. In an effort to attract more borrowers, many of these lenders are now offering either non-recourse or partial-recourse loans.
The traditional recourse loan offered by most institutions meant that
lender could have claim on personal or corporate assets in event of default of mortgage holder. A non-recourse loan on other hand means lender cannot hold you personally liable if you fail to repay debt as promised. The only recourse of lender is to take property you've pledged as security for your loan, but he cannot claim any other assets or money from you if you default.
If you plan to build apartment building instead of buying it, some lenders may offer you a partial recourse construction loan. This means that until work is finished on project, borrower is responsible for entire amount of construction loan. However, as soon as project is ready for occupancy and apartment building has some value for lender to seize, borrower is responsible for only 50% or less of value of construction loan in event of a default.
Whatever method you choose to provide apartment financing, it is important to make sure you understand all details. Choose a lender that has both experience and desire to sit down with you and take time to answer your questions clearly. The right lender will go a long way in helping you find success in exciting world of property investing and management.
