What distinguishes recourse mortgages from non-recourse mortgages?

Recourse mortgages and non-recourse mortgages are fundamentally distinguished by the liability of the borrower for the loan. In a recourse mortgage, if the borrower defaults, the lender has the right to pursue the borrower's personal assets beyond the property that secures the loan. This means that borrowers have personal liability, and their other assets (like bank accounts, vehicles, and other properties) can be used to satisfy the debt if the property’s sale does not cover the outstanding loan balance.

Conversely, with a non-recourse mortgage, the lender can only claim the collateral that secures the loan, which is typically the property itself. If the borrower defaults, the lender’s recovery is limited to the property, and the borrower does not risk losing personal assets. This can make non-recourse mortgages a less risky option for borrowers, particularly in volatile real estate markets.

While interest rates, repayment timeframes, and property types are important aspects of mortgages in general, they do not serve as the defining distinction between recourse and non-recourse loans. The key difference lies in the extent of liability that borrowers face, making borrower liability the essential factor in understanding these two types of mortgages.