Unlike a non-recourse mortgage, a recourse mortgage is the most common type of mortgage offered because of the lower risk it carries for the financial lender. In the case of a mortgage default, the financial lender has the right to sell the asset which was used as collateral in the mortgage to recover funds.
Where this differs to a non-recourse mortgage is the legal right for a financial lender to pursue an individual if the funds from the sale of the asset do not cover the costs of the mortgage. This can include legal action which forces the individual to liquidate other personal assets or at times to garnish future earnings until the lost funds have been recovered.
Characteristics of a recourse mortgage:
- Lower interest rates than a non-recourse mortgage
- Eligible to those even with a higher risk profile or bad credit
- Lower risk to the financial lender, but higher risk for the individual in the event of mortgage default