Hotel mortgages

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With the hotel sector continuing to perform well in the economy and Revenue per Available Room (RevPAR) growing, investor confidence in the sector is soaring. And, as a result, the amount of funding available to investors is ever-increasing.

Hotels typically offer sustainable income streams, attractive returns and frequent opportunities to add value to the investment, which are all aspects that lenders and investors will look at and appreciate.

However, despite the success of the sector, the hotel industry is season and can be unpredictable which means some of the more traditional lenders are hesitant to lend to hotel investors.

So how do i get a mortgage for a hotel or B&B?

Before you apply, the main thing to know is that most lenders will only fund experienced operators with a minimum of 2 or 3 years in the industry.

If you want to buy your first hotel, there are still lenders out there that will look at your application, but you must have at least specific hotel-related experience – even if you’re planning on putting managers into the property to run it for you.

You will benefit from having a registered management qualification like an NVQ Level 4 and if you don’t have this, then you may need to consider recruiting an existing hotel manager to join your team and put them on the mortgage application.

What types of hotel purchase are there?

There are two main types – freehold and leasehold. If you can afford it, a freehold provides an asset but can have a large impact on your business capital that could be invested elsewhere.

When purchasing a freehold hotel, the more successful and desirable the location the more it will be preferred by lenders. However, if you’re looking at buying a leasehold hotel, lenders will often require tangible security like your home or any other property that you may own.

If you don’t have any of these, then there are lenders that will offer an Enterprise Finance Guarantee loan, giving you the backing of the government. It should also be noted that the loan term that a lender will offer you is unlikely to be longer than the remaining lease.

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Commercial guides

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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