When you borrow for a commercial property, the loan you choose makes all the difference. With a bank’s recourse loan, if the loan goes south, your entire asset portfolio and credit are on the line. With Fidelity Mortgage Lender’s private-money non-recourse commercial loan, only the property you borrowed against is at risk—your other assets and your credit stay protected. That’s why choosing the right loan isn’t just important, it’s essential.
This article explains the differences between recourse and Fidelity’s non-recourse commercial loans—how they work, who they protect, and which may fit your needs. The goal is simple: to help you make the right decision when borrowing money.
What Recourse and Non-Recourse Really Mean
Recourse Loan
With a recourse loan, the lender can go after more than just the property if you default. If selling the property doesn’t cover the full debt, they can pursue a deficiency judgment. That means your other assets, business holdings, personal savings, and even your home could be at risk.
Fidelity’s Non-Recourse Commercial Loan
With a non-recourse loan, the lender’s only claim is the property itself. If you default, they can take and sell the property, but if the sale falls short of the loan balance, they generally cannot come after you, your company, or your other assets. Their recovery stops at the property. Fidelity Mortgage Lenders provides non-recourse loans, limiting borrower liability to the property only.
How Liability Differs, Who Gets Chased for the Money,
Recourse vs. Non-Recourse Commercial Loans
With a recourse loan, your personal and business assets are exposed beyond the property. With a non-recourse loan, your liability ends at the property itself, giving you greater peace of mind and financial protection.
| Loan Type | Your Liability | Lender Option | Who’s Protected |
|---|---|---|---|
| Recourse Loan | Personal liability | The lender can pursue your other assets | Lender |
| Non-Recourse Loan | Limited to the property | Lender sells the property and absorbs the loss if there is one | You (borrower) |
Interest Rates, Underwriting, and the Risk Trade-Off
Recourse vs. Non-Recourse Commercial Loans
The highlights of the trade-off are these: while a recourse loans cost less upfront, it puts all your assets at risk. With a non-recourse loan, it may cost a bit more, but it keeps your liability limited to the property. The choice comes down to how much protection you want. At Fidelity Mortgage Lenders, we specialize in non-recourse loans that safeguard your assets while keeping deals moving.
| Recourse Loan | Non-Recourse Loan |
|---|---|
| Lower interest rates | Higher interest rates |
| Higher loan-to-value (you borrow more, put less down) | Lower loan-to-value (you borrow less, put more down) |
| Stricter underwriting, heavy cash flow review | Easier underwriting |
| Your liability is unlimited – the lender can chase your other assets if the loan goes south | Your liability is limited – the lender’s only claim is the property |
| Protects the lender |
Protects you (the borrower) |
Common Carve-Outs, The Bad Boy Guarantees
Carve-Outs – Rules in a non-recourse loan that keep borrowers honest. If broken, the borrower can lose their protection and become personally liable.
A non-recourse commercial loan limits your liability to the property. But most lenders add carve-outs (or “bad boy guarantees”). If you trigger one, the loan becomes recourse, and you may be personally responsible.
Typical carve-outs include:
- Fraud or lying on the loan
- Intentional damage or serious neglect
- Misusing rent or insurance money
- Filing for bankruptcy just to block foreclosure
- Fire Insurance Expiration
Why this matters:
- Borrowers: You still get non-recourse protection in normal situations, making these loans possible and available.
- Lenders: Carve-outs prevent abuse and protect against bad faith actions.
👉 Bottom line: Carve-outs keep loans fair—borrowers stay protected when acting responsibly, and lenders stay protected from misconduct.
Limited Recourse and Hybrid Loan Structures
A limited recourse loan is partway between recourse and non-recourse. The lender can only claim specific things if the loan goes bad—for example, a set percentage of the debt or another property you pledged. Your home and other assets stay off-limits.
👉 Think of it as a middle ground: lenders get some extra security, borrowers keep most of their protection.
Recourse vs. Non-Recourse: Which Fits You?
If protecting your personal and business wealth matters most, a non-recourse loan gives you the flexibility and security to move forward with confidence.
| Non-Recourse Commercial Loan | Recourse Loan |
|---|---|
| Protects your personal and business assets | Puts your personal assets at risk |
| Works even for weaker-income or empty properties | Requires stable, income-producing properties |
| Lower LTV (you borrow less, bigger down payment) | Higher LTV (you borrow more, smaller down payment) |
| Slightly higher interest rates | Lower interest rates |
| Liability limited to the property (unless carve-outs triggered) | Full personal liability if loan goes south |
| Appeals to borrowers who want protection and flexibility on property type | Lower interest rate and savings |
Quick Decision Checklist
Before you pick a loan, ask yourself:
- What’s my end goal: minimizing interest costs, or closing quickly with simpler terms?
- Is the property strong enough to qualify for non-recourse financing?
- Am I comfortable exposing my other assets to risk?
- Do I fully understand the carve-outs and “bad boy” guarantees?
- Have I compared interest rates, LTVs, and down payment requirements?
- What are the prepayment penalties and balloon risks?
- Do I meet the liquidity/net worth requirements for the loan type?
- Have I reviewed state law impacts with my lawyer and tax advisor?
- Will this loan structure help or hurt my long-term investment strategy?
Simple takeaway
Recourse = cheaper, but your assets are on the line.
Non-recourse = safer for you, but it costs more and is harder to get.
With over 50 years of experience, Fidelity Mortgage Lenders helps clients balance cost, speed, and protection—closing deals others can’t. Let us be your partner, contact us today.
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