Non-recourse Loans for Purchasing Property in a Retirement Account
The IRS requires any loan secured by property owned in a retirement account must be a non-recourse loan. A non-recourse loan means that you are not personally liable for repayment of the loan. The lender cannot "look through" your retirement account to any other assets you own. The lender can, of course look to all your assets in that specific retirement account for repayment of the loan.
Only certain lenders, such as those in the table below, make non-recourse loans, and the loan terms are different from conventional conforming loans. Contact these lenders directly to investigate loan terms and conditions for your investment property purchase.
|
Lender |
Property Types |
Terms |
|
Single family detached, 1-4 units, and multi-family units. Some condos. No raw land or commercial properties. |
Max LTV – 60-70%. Max Term – 20-25 years Min DSCR* 1.25 Min Loan -- $50,000 |
|
|
All except raw land |
Max LTV – 75% Max Term – 20-30 years Min DSCR – NA Min Loan -- $100,000 |
*DSCR – Debt Service Coverage Ratio
Only self-directed retirement accounts can own property (see Taking Title - in a Retirement Account). Also, check with your tax advisor regarding Unrelated Business Income Tax (UBIT) for income generated by income property held with a mortage in your retirement account.