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IRA Non-Recourse Loans

A non-recourse loan works in tandem with your self-directed IRA to provide you with the means of purchasing real estate. At First Western Federal Savings Bank, we are your non-recourse loan lenders of choice, and can help you apply and receive a loan to go towards acquiring real estate.

When you work with First Western Federal Savings Bank, you are working with one of the nation’s top non-recourse loan lenders with more than 40 years of experience. Contact us for more information or begin applying today.

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What Is A Non-Recourse Loan?

A non-recourse loan is a loan where the borrower is not personally liable for repaying any outstanding balance on the loan, but the loan has to be secured by offering collateral, which would be the real estate property. If the borrower does not repay their loan, then they lose their collateral, but again, are not responsible for repaying the outstanding balance on the loan. If the loan remains unpaid, the lender has no option than to foreclose on the property. Basically, a non-recourse loan can be summed up like this:

  • You put up collateral as an assurance that you will pay off your loan in a timely manner
  • A non-recourse lender gives you a loan
  • If you can’t pay it off, you lose your collateral

One of the biggest benefits of a non-recourse mortgage is that the borrower is not held personally responsible for the loan, since the non-recourse lender can only seize the collateral associated with the loan and nothing else. A non-recourse IRA loan is secured by the collateral. What this means is that in the event of a default, there is absolutely no recourse or ability to collect the mortgage loan from the IRA owner personally or the IRA itself.

The Difference Between A Non-Recourse and Recourse Loan

A recourse loan is a type of debt in which a lender can hold the borrower personally liable for repaying the debt. With recourse loans, the lender can pursue repayment of the loan beyond the original pledged collateral (which would be the property that was purchased). If the borrower fails to repay the loan according to the obligation, the lender can take legal action in order to fully collect what is owed, like garnishing wages, levying accounts, and any other collateral.

Prohibited Investments

When the IRS established the rules for IRAs back in 1975, they declared three basic types of prohibited investments:

  • Life Insurance
  • S Corporations
  • Collectibles (stamps, artwork, rugs, guns, coins, and other types of personal property)

The IRS has also established regulations regarding Prohibited Transactions between your IRA and certain people that are classified as a “Disqualified Person.” Most all other assets are available as IRA Investments as long as your IRA Custodian is in agreement.

Benefits of a Non-Recourse Loan

As discussed above, a non-recourse loan is a type of loan that you can take out using your IRA to purchase real estate investments. These loans are owned by your IRA and are subject to UDFI, or unrelated debt-financed income and must be repaid through your IRA. While they help you finance your real estate investment, there are also other benefits of non-recourse loans.

Your IRA is Liable For Your Loan, Not You

When you open a non-recourse loan, your IRA owns it, not you, which means that you will not be held personally liable should anything happen over the life of the loan.

There Is No Recourse Against You if You Default

As opposed to a recourse loan, there is no financial backlash if you default on your non-recourse IRA loan. You are protected as well as your IRA, so the lender cannot take anything from you, with the exception of your collateral. 

In Case of a Default, Only the Lender Can Seize the Collateral

Should you ever default on your loan, you will only lose your collateral and nothing else. Since the loan is for your IRA, your credit will not drop, and you will not lose any additional assets except for the property. 

Purchase Real Estate With Your IRA

Did you know that the ability to buy real estate with your self-directed IRA is allowed and has been for quite some time? Since 2008, First Western Federal Savings Bank has been a nationwide non-recourse loan lender of choice, with a specialty in helping people purchase real estate with their self-directed IRAs. Yet, for all of us at First Western Federal Savings Bank, non-recourse loans are more than just our specialty — they are our passion.

There are several types of property that you can acquire through a non-recourse loan, and our non-recourse loan lenders can help you get there. Your non-recourse lender will give you the loan you need to acquire the property, and you will put up collateral as a way of promising to pay your loan on time. If you don’t pay your loan on time, the lender can take your collateral. The types of real estate that you are able to invest in with your non-recourse loan includes:

  • Residential Property - This is one of the most popular types of property that can be bought with your non-recourse loan. In addition to houses, condominiums and townhouses can be purchased with a non-recourse loan.
  • Commercial Property - With your non-recourse loan, you can invest in property like a storefront, officespace, or some other form of headquarters.
  • Multi-Unit Property - Multi-unit property, or a multi-family home and apartment building, can also be purchased with your self-directed IRA. Investing in apartment buildings can be a highly lucrative business deal.
  • Agricultural Property - Invest in agricultural property with your non-recourse loan. A lease contract can also be implemented when crops or livestock are utilized on the agricultural property, and this setup can actually be used to help generate income.

The point of buying real estate with a mortgage loan is for it to generate income. Here are the four main types of properties that can be purchased with your IRA loan:

Residential Property

This type of property includes single family residences, including condos and townhomes.

Commercial Property

This type of property typically houses businesses, offices, or retail stores.

Multi-unit Property

This type of property refers to things like multi-family homes or apartment buildings.

Agricultural Property

This type of property can be purchased and can generate income with a lease contract. It typically supports crops or livestock.

Purchasing Rental Property With Your Non-Recourse Loan

The demand for rental property across the United States is growing, and there is market data to confirm that this trend will continue to grow. Its relevance creates a significant avenue for investors to grow wealth and experience financial success by investing in real estate. Purchasing rental property with your non-recourse loan creates a whole new avenue for financial possibilities, which will add a tremendous value to your retirement asset and your investment portfolio as a whole. Learn more about purchasing rental property with your loan.

Purchasing Vacation Rental Property With Your Non-Recourse Loan

Whether it is a beachfront property or a rustic cabin in the woods of Colorado, purchasing vacation property will provide you with a huge return on investment. Why? Well, the increase in vacation rental properties is predicted to take over the hotel industry. Further, studies show that in recent years, more people are traveling and more frequently as well. To keep up with the number of families going on vacation, vacation rentals are growing in popularity, so don’t miss your chance at purchasing a vacation rental and planning for your retirement. Contact our non-recourse loan lenders today to learn more.  


Establish an account with a self-directed IRA custodian.

Find an acceptable income producing property that meets your investment goals

Execute a purchase agreement in the name of your IRA according to your custodian requirements.

Apply for a Non-Recourse Loan with First Western Federal Savings Bank

Complete a "Direction of Investment" form directing them to fund your purchase with your IRA funds

Contact us today and see how your premier non-recourse loan lender, First Western Federal Savings Bank, can help you buy real estate with your self-directed IRA. Your non-recourse loan is waiting — apply today!

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Disclaimer: First Western Federal Savings Bank is not affiliated with any of the listed custodians, administrators, or facilitators nor do we receive compensation to provide you with this information. We are also not responsible for the website content at third-party sites. First Western Federal Savings Bank and its employees do not provide tax, legal, or investment advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or investment advice. You should consult your own tax, legal, investment advisors before engaging in any transaction.


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