The Quick Read: Hard money loans to individuals are almost always full recourse, which means the borrower is personally liable for the whole debt, not just the property. If a sale after default falls short of the balance, the lender can pursue other assets, subject to state law. The terms that matter are the ones in the documents you sign.
- Recourse sits in the note itself. For an individual borrower, no separate guaranty is needed to create personal liability.
- A guaranty is a separate document. It can be unlimited, limited to a cap, or triggered by a named event.
- Titling a property in an LLC does not remove personal exposure when the owner signs a guaranty.
- State anti-deficiency rules vary by state, foreclosure type, and loan type. Many were written with residential borrowers in mind.
- Nonrecourse hard money exists but is less common, and it carries carve-outs that can make the loan personal again.
Key Terms Defined
Recourse loan: a loan where the borrower is personally liable for repayment, so the lender can reach assets beyond the collateral.
Nonrecourse loan: a loan where the lender can foreclose on the collateral but cannot sue the borrower for a shortfall.
Personal guaranty: a separate signed document that makes a person liable for another party’s debt, usually the owners behind an LLC.
Deficiency: the gap between what is owed and what the foreclosure sale produced.
Deficiency judgment: the court order that turns that gap into a personal money judgment against the borrower or guarantor.
Carve-out (bad-boy provision): a specified act, such as fraud or misusing rents, that makes an otherwise limited-recourse loan fully personal.
Waiver of deficiency: a lender’s agreement not to pursue a shortfall after the collateral is sold.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
What Recourse Means on a Hard Money Loan
Recourse means the debt follows you, not just the building. Nolo explains that on a recourse loan the borrower is personally liable for full repayment. After foreclosure, the lender can seek a deficiency judgment and go after other assets, within state limits. On a nonrecourse loan, the lender can take the property but cannot sue for what is left over.
Hard money sits on the recourse side. Forbes Advisor lists hard money loans, meaning short-term real estate loans from non-bank lenders, among the common recourse loan types. The sequence it describes is simple: the lender takes the collateral first, then asks a court for a deficiency judgment on any remaining shortfall.
Why do lenders insist on it? Hard money underwriting centers on the property, the plan, and the exit. The personal liability is a second layer. It also tells the lender that the borrower intends to finish the project. That logic is old and still holds, as this BiggerPockets discussion lays out. Use it for the concept only.
Across the wholesale network Lendmire works with, hard money is business-purpose lending against non-owner-occupied 1-4 unit residential property. Leverage is asset-based and tiered by experience. Every figure varies by lender, property, and experience, and nothing here is a commitment to lend.
Individual Borrower vs. LLC Borrower
Signing in your own name removes any argument about who is liable. You are on the note, so you are on the debt. A separate guaranty is often redundant, though lenders may still ask for guaranties from related entities.
An LLC borrower works differently. The company is on the note, and the people behind it sign a guaranty. That guaranty is what carries liability through to the owners. Entity ownership may help with other kinds of claims, but it does not defeat a signed guaranty on the loan itself. (Many investors learn this at the signing table, not before.)
| Factor | Individual borrower | LLC borrower |
|---|---|---|
| Who is on the note | The person | The company |
| Source of personal liability | The recourse note | A signed guaranty |
| Separate guaranty needed | Often redundant | Usually required |
| Property exposed | Yes, and other assets | Yes, and guarantors’ assets |
| Entity shield on this loan | None | Limited or none |
Lenders that accept entity borrowers do so subject to program terms and eligibility, and the guaranty request is routine.
Recourse vs. Nonrecourse Side by Side
Nonrecourse hard money is the exception. Some larger lenders offer it, typically at lower leverage and for borrowers with stronger track records, according to Janover’s hard money glossary. Full nonrecourse on small residential loans is rare. A few lenders may offer limited recourse to seasoned, high-volume investors.
| Factor | Recourse | Nonrecourse |
|---|---|---|
| Lender recovery | Collateral plus other assets | Collateral only |
| Deficiency judgment | Available, subject to state law | Not available |
| Personal exposure | Full | Limited to carve-outs |
| Typical borrower | Most hard money borrowers | Seasoned, lower leverage |
| Hidden trap | Exposure beyond the property | Carve-outs that turn it personal |
The label on the loan is not the final word. Crequity notes that carve-outs and state law can change whether a loan is truly nonrecourse, whatever the paperwork calls it.
The Four Guaranty Structures
Guaranty scope is where negotiation actually happens. Four shapes show up.
- Unlimited (full): covers principal, interest, and collection costs. Exposure is the whole debt.
- Limited: capped at a set amount. Exposure stops at the cap.
- Conditional: triggered only by a defined event, such as a transfer without consent or a missed completion.
- Carve-out only: the loan is nonrecourse until a named bad act occurs.
Typical carve-out events include fraud, misusing rents or deposits, an unauthorized transfer, unauthorized additional debt, waste, unpaid taxes or insurance, interfering with a bankruptcy, and environmental misconduct. Read that list closely. A few of those can happen by carelessness, not bad intent. An unpaid insurance premium during a rehab is a classic example.
What Happens After a Default, Step by Step
The path from missed payment to personal judgment has defined stages. The timeline and available remedies depend on state law.
1. Default. The borrower misses a payment, misses a maturity date, or breaches a covenant. Default interest and fees may begin to add up under the note.
2. Acceleration. The lender declares the full balance due.
3. Foreclosure and sale. The lender forecloses and sells the collateral. Proceeds go to the balance.
4. Deficiency calculated. The deficiency is the gap between what is owed and what the sale produced. Fees, default interest, and legal costs widen it.
5. Deficiency judgment. Where the state allows it, the lender asks a court for an order that turns the gap into an unsecured personal judgment. This is the point where your other assets come into play.
6. Collection. With a judgment in hand, the lender can use ordinary collection tools against the borrower or guarantor.
Lenders do not always chase a deficiency. Per Crequity, the cost of collection and the borrower’s collectability both matter. That is a practical reality, not a legal protection. It is still a right the lender holds, so do not plan around leniency.
A Hypothetical Deficiency, Walked Through
Picture an individual who buys a 1-4 unit rental on a bridge loan with a note in their own name. The project stalls, the term runs out, and the loan defaults. The sale at foreclosure brings in less than the payoff.
The deficiency is built from layers: the unpaid principal, then accrued interest and default charges, then legal and foreclosure costs, minus the sale proceeds. Each added layer widens the gap. Nothing in that example uses real dollars on purpose, because the shape matters more than the figures.
Two points follow. First, the deficiency grows the longer a default drags on. Second, in some states the gap is measured against fair value instead of the foreclosure bid, which changes the outcome. That is a state-law question, and a local attorney is the right person to answer it.
Where State Law Changes the Picture
Anti-deficiency rules are the main edge case, and they are uneven. Nolo’s deficiency judgment overview says states often prohibit deficiency judgments after nonjudicial foreclosure, and that the laws vary and are complex.
Nolo’s anti-deficiency chart gives examples. Alaska and California bar a deficiency after nonjudicial foreclosure. Arizona bars it for single- or two-family residences on 2½ acres or less. Colorado and Florida allow it. An Emory Law Journal comment sorts state laws into three groups: nonjudicial-foreclosure bars, fair-value laws, and time limits. It also points to New Hampshire, where a deficiency has no statute of limitations and a lender reportedly pursued one up to 20 years later.
Here’s the catch. Many of these protections were written for residential, owner-occupied, or purchase-money loans. A business-purpose investor loan may not qualify for them. Do not assume a state’s anti-deficiency statute covers your note. Confirm it by loan type and purpose with counsel.
Two other background points. In many jurisdictions, purchase-money loans are treated as nonrecourse and later loans as recourse, as Wikipedia’s deficiency judgment entry summarizes. Treat that as background, not a per-state rule. And a deed in lieu or short sale does not automatically release you. Any lender release is negotiated.
How the Exit Plan Becomes a Recourse Issue
An extended or defaulted bridge loan is a recourse event. That makes the exit plan part of your risk, not a side note. Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path. Network hard money terms run six to eighteen months, interest-only, so the runway is short. There are no multi-year options on the current program.
Leverage matters here too. Across the network, fix-and-flip loans run up to 93% of project cost at 5+ completed projects, 90% at 2+, and 85% with fewer than 2, all capped at 75% of after-repair value. Bridge purchases without rehab go up to 80% of purchase price. Cash-out and rate/term refinances go up to 65% of value. The top tier is reserved for experienced investors, and the figures vary by lender, property, and experience.
Lower leverage means a bigger cushion between the sale price and the debt. That cushion is a more affordable form of protection against a deficiency. For a longer look at how the exit lines up, see the fed’s first hike since 2023 lands on hard money and bridge borrowers, and the complete DSCR loans guide for the long-term side.
Where Hard Money Differs From DSCR on Recourse
The existence of a guaranty is not the difference. DSCR loans on 1-4 units are also typically recourse through a guaranty. The difference is term length and exit risk. A DSCR loan is built around a 30-year fixed spine, with extended terms and interest-only periods available through select lenders. Hard money is a short bridge with a maturity wall.
Hard money underwriting leans on collateral and equity. Because the guaranty puts your personal balance sheet behind the loan, your other holdings still matter to the lender.
Clauses to Check Before You Sign
Run this list on every note and guaranty.
- Is there a guaranty, and is it unlimited, limited, or conditional? Ask for a cap where you can get one.
- What is on the carve-out list? Look for events you could trigger by accident.
- What state law governs? Foreclosure route and deficiency rules come from it.
- Is the loan purchase-money or a refinance? The answer can change how state protections apply.
- Does the lender accept a deed in lieu? Get any release in writing.
- Is there a waiver of deficiency? It is rare, but it is a negotiable term.
- What are the extension rights? A clean extension option reduces the chance of a maturity default.
- Is the property cross-collateralized with other assets? If so, one default can reach more than one property.
Credit and underwriting still matter. The network generally sets a 620 minimum score, with additional conditions below 660, and first-time investors qualify at the lower leverage tiers. Underwriting stays asset-based. Eligibility is subject to lender guidelines.
Common Misconceptions
1. An LLC protects me from the loan. A signed guaranty usually bypasses it for repayment.
2. Nonrecourse means no personal risk. Carve-outs exist, and the lender can still take the collateral.
3. Recourse means they will always chase me. Lenders weigh cost and collectability, but the legal right remains.
4. Anti-deficiency laws always protect me. They depend on state, foreclosure type, and loan type.
5. Hard money ignores the borrower. Approval is collateral-focused, but the guaranty makes your balance sheet relevant.
6. Recourse and a guaranty are the same thing. They are separate instruments that can overlap or stack.
One more item sits outside the loan. Canceled recourse debt can be taxable income, and a nonrecourse sale can trigger gain if the debt exceeds basis. Tax treatment varies; consult a qualified professional.
Frequently Asked Questions
Are hard money loans recourse?
Almost always. Short-term hard money loans from non-bank lenders are a standard example of recourse lending. The note, a guaranty, or both put the borrower personally on the debt. Nonrecourse hard money exists but is less common, and usually comes with lower leverage and stronger borrower experience.
If I borrow as an individual, do I still sign a guaranty?
Often it is redundant, because your name is already on the note. Lenders may still ask for guaranties from related entities. Read the guaranty language for scope, caps, and carve-outs, since those terms define your exposure.
Can a lender take my other property after a deficiency?
Where state law allows a deficiency judgment, the lender can use ordinary collection tools against your assets. Exemptions and protections such as homestead rules vary by state. Ask a local attorney how they apply to a business-purpose loan.
Does an anti-deficiency state mean I am safe?
Not automatically. Protections vary by state, foreclosure type, and loan type, and many were written for residential or purchase-money loans. Confirm applicability to your specific loan before relying on them.
What can I negotiate on recourse terms?
Guaranty scope, a cap on exposure, the carve-out list, extension rights, and whether a deed in lieu is accepted. Leverage helps too. Lower leverage gives you a cushion against a shortfall and a stronger position at the table.
What to Do Next
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. For the next step after the bridge, Lendmire’s piece No-Minimum DSCR Cash-Out Program Terms for Hard Money Exits covers the refinance side. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Recourse terms are written into the documents, so the strongest protection is reading them before the maturity date, not after.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Nolo – Recourse vs Nonrecourse
2. Forbes Advisor – Recourse vs Non-Recourse
4. Janover – Hard Money Loan glossary
5. Crequity – Recourse vs Nonrecourse
6. Nolo – Deficiency Judgments
7. Nolo/AllLaw – Anti-Deficiency Chart
9. Wikipedia’s deficiency judgment entry
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Use a Hard Money Loan to Buy and Flip a House? · Can You Have More Than One Fix and Flip Hard Money Loan at Once? · Can a Business Owner Qualify for a Larger Hard Money Flip Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.