What is a non-recourse multifamily loan?
A non-recourse multifamily loan limits the lender's remedy on default to the property itself rather than your personal assets, with carve-outs that restore personal liability for bad acts such as fraud, misapplication of funds, environmental damage, and voluntary bankruptcy. Agency small balance loans and CMBS loans are typically non-recourse from about $1 million; bank and bridge loans are usually full recourse.
Recourse vs non-recourse
| Full recourse | Non-recourse | |
|---|---|---|
| Lender's remedy on default | The property plus your personal assets under the guarantee | The property only, except carve-outs |
| Who offers it | Banks, credit unions, most bridge and DSCR lenders | Agency (Fannie Mae, Freddie Mac), CMBS, some debt funds |
| Typical minimum loan | Any | About $1 million |
| Pricing | Often slightly lower | Slightly higher, or similar on agency |
| Underwriting | Borrower and property | Property first; sponsor net worth and experience still checked |
| Prepayment | Flexible | Yield maintenance or defeasance common |
Ranges vary by lender.
The carve-outs
Non-recourse loans include a carve-out guarantee, sometimes called a bad-boy guarantee, signed by the sponsor. It restores personal liability for:
- Fraud or material misrepresentation.
- Misapplication of rents, insurance proceeds, or security deposits.
- Waste or intentional damage to the property.
- Environmental contamination.
- Voluntary bankruptcy filing, or transfer of the property without consent, which often triggers full recourse for the entire loan.
Read the carve-out list before signing. Some are narrow losses; others are full-loan triggers.
Why it matters
If a building fails for market reasons, a non-recourse borrower loses the equity and the property, not their home and other investments. That protection is why many investors move to agency financing as soon as their buildings qualify.
What you give up
- Flexibility: agency and CMBS loans have rigid prepayment terms and slower modifications.
- Speed: 45 to 75 days to close versus 30 to 45 at a bank.
- Value-add tolerance: non-recourse lenders want stabilized income.
- Small loans: below $1 million, non-recourse is hard to find.
Sponsor requirements still apply
Non-recourse does not mean no underwriting of you. Agency lenders check net worth near the loan amount, liquidity of nine to twelve months of debt service, credit, and multifamily experience, because the carve-out guarantor has to be creditworthy.
A common sequence
Buy or stabilize with a recourse bank or bridge loan, then refinance into non-recourse agency debt once occupancy and coverage qualify. The recourse period is the value-add phase; the non-recourse loan is the long hold.
How CommFi handles it
Our lending desk tells you whether the building qualifies for non-recourse today and prices the recourse alternatives alongside. It funds direct when it fits, and when an agency or CMBS lender is the right fit, the desk searches a database of 7,000+ lenders and the non-recourse lenders active in your market compete for the file. Zero upfront fees.
Related reading
Related questions
- What does non-recourse mean on a multifamily loan?
- On default, the lender can take the property but not your personal assets, except for carve-outs covering bad acts.
- Who offers non-recourse apartment loans?
- Agency lenders (Fannie Mae and Freddie Mac programs) and CMBS lenders, typically from about $1 million on stabilized buildings.
- What are carve-outs on a non-recourse loan?
- Events that restore personal liability: fraud, misapplication of funds, waste, environmental damage, unauthorized transfers, and voluntary bankruptcy.
- Are bank multifamily loans non-recourse?
- Usually not. Banks and bridge lenders typically require a full personal guarantee.
- Does non-recourse cost more?
- Sometimes slightly, and it comes with stricter prepayment terms and slower closings. On agency loans the rate is often competitive with banks.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.