What Is Non-Recourse Financing
Non-Recourse Financing: A loan secured by the revenue of the project the loan intends to fund, and nothing else. That is, non-recourse financing does not allow the bank or other lending institution access to the borrower's other assets in the event of default. THE PROBLEM: Many of our clients ask us why we have a highlighted tab called "Non-Recourse Financing" when we're not in the commercial real estate business. It's pretty simple, when we decided to grow our product set to enable Self-Directed Retirement Investors to take advantage of Hanover's buying power attaining discounted cash flowing real estate our clients had one problem. A common conventional loan does not qualify for Self Directed Retirement Accounts. The IRS does not allow for ANY recourse to the individual or the Retirement Account. We knew that we could help. We went out and interviewed clients that have tried to obtain financing from the few institutions that lend on a Non-Recourse basis to retirement accounts. The individuals we interviewed were highly distraught with their overall experience.
Here is the process we continued to hear:
This is a problem but since those institutions are offering a portfolio product they don't even have to give a true 'reason' for denial. Enter Hanover Companies new Self-Directed Retirement Product paired with NON-RECOURSE Financing that is included with the property. The terms of our Self-Directed Loans traditionally offered with our product will be 2-3% Current Market Offerings from other Non-Recourse Banks. Some other things to consider... We may finance individual investors that may not have qualified for conventional loans. We may be able to finance foreign national investors. Disclaimer: Hanover Companies is not a mortgage lender or loan originator. The financer may be a bank, individual or private mortgage or deed.
- Individual's retirement account is "pre-approved" for Non-Recourse Financing. This means the account has enough money to purchase the home and reserves for incidentals, vacancies, repairs etc.
- The individual would go out, offer on a property and put earnest money up on the behalf of their retirement account
- The excited individual would send their contract to their national non-recourse lender and the lender would call them back, have them fill out a form and charge their account or credit card for application and appraisal fee
- The appraisal fee or property form would go to pre underwriting or "loan committee"
- The originator would call back the individual owning the self-directed account that made the offer and simply state, sorry, this property is denied but the good news is you're still pre-approved aka TRY AGAIN. We have heard people have tried as many as 5 times before getting fed up enough and either backing out of real estate in total or having to pay cash.
Non-Recourse Financing Resources
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