Unlike a recourse mortgage, a non-recourse mortgage is used to protect an individuals assets in the event of mortgage default. If default occurs, the financial lender has the right to sell the asset in question as part of the mortgage collateral. In a non-recourse mortgage, if there is still money owing to the financial lender they cannot go after other assets or wages to recover losses.
Financial lenders prefer to offer clients recourse mortgages as these protect the bank to a further extend in the event of a mortgage default where the final sale of the asset does not cover to final mortgage cost.
Characteristics of a non-recourse mortgage:
- Only individuals with a good credit rating are eligible
- Interest rates are generally higher because the risk to the financial lender is higher
- Upon mortgage default, a financial lender cannot pursue other personal assets or wages
- Financial lenders will always try and sell a recourse mortgage product