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Recourse Loan

Understand recourse loans in Canadian real estate — what they are, how they work, and their impact on borrower liability.

Recourse Loan

August 08, 2025


What is a Recourse Loan?

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.

Why Recourse Loans Matter in Real Estate

In Canadian real estate financing, recourse loans increase lender security but expose borrowers to greater personal liability.



Key points:
  • Lender can claim collateral property and other assets
  • Common for residential mortgages and small commercial loans
  • Typically has lower interest rates than non-recourse loans



Understanding recourse loans helps borrowers evaluate risk and negotiate terms.

Example of a Recourse Loan in Action

The homeowner’s mortgage was a recourse loan, meaning the lender could pursue other assets if the property was sold for less than the outstanding debt.

Key Takeaways

  • Allows lender to pursue borrower’s assets beyond collateral
  • Common for most residential mortgages
  • Increases borrower’s personal liability
  • May offer lower interest rates
  • Important factor in borrower risk management

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