A loan with financed property guarantee is a non-recourse loan that requires a personal guarantee from one or more guarantors. It allows the lender to more confidently qualify a borrower who may not be making a significant down payment and/or present more credit risk. In addition, a guaranteed loan often offers lower interest rates than other types of loans.

For example, let’s assume a empréstimo com garantia de imóvel financiado and co-borrower are purchasing a new investment property that is being purchased and financed at the same time and that they are currently jointly and personally obligated on mortgages securing five other investment properties as well as their principal residence. This makes a total of six financed properties (not including the financed building lot). With a full recourse guaranty, if the sale proceeds of the property are insufficient to pay off the loan balance, the lender will look to each of the individual guarantors for funds that can be used to pay off the balance.

Home Equity Loans: Everything You Need to Know

A carve-out guaranty, which Geraci frequently drafts for lenders, ties liability to bad acts and/or loss events like fraud, or to specific appraisals and limits the amount the guarantors are liable for, which may allow them to avoid full liability. Alternatively, the lender may negotiate with the guarantors to limit their liability or provide for a declining guarantee that starts at 100% and falls based on certain hurdles such as lease-up.