Are DSCR loans recourse or non-recourse?
Most DSCR loans are full recourse with personal guarantee. Non-recourse structures exist on larger loans but carry higher rate.
The vast majority of DSCR loans are full-recourse loans secured by the property AND backed by personal guarantees from LLC members at 25%+ ownership. If the property fails to support the loan, the lender can pursue both the property AND the borrower personally for any deficiency. Non-recourse DSCR exists but is the exception: typically available on loans over $1.5-2M, requires stronger borrower profile (700+ FICO, substantial reserves), and prices 0.25-0.75% above recourse pricing. Some lenders offer "limited recourse" - recourse only for fraud, environmental issues, or material misrepresentation, but otherwise non-recourse on the property cash flow. Important for asset protection planning: full-recourse personal guarantees pierce the LLC's liability shield in default scenarios. Investors who want true asset isolation typically pay up for non-recourse on larger loans, or hold property in series LLCs / land trusts to compartmentalize exposure. Discuss with a real estate attorney before structuring large portfolios on full-recourse DSCR.
People also ask
When does non-recourse DSCR make sense?
Loans over $1.5-2M where the rate premium (0.25-0.75%) is small relative to the asset protection benefit. Smaller loans rarely justify non-recourse pricing.
Does LLC closing remove personal liability?
Not on full-recourse DSCR. LLC closes the title, but personal guarantees still apply. Asset protection on DSCR comes from non-recourse structure, not the LLC alone.
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