A commercial mortgage is vital to the majority of hotel projects. As the core pillar of your capital stack, a mortgage is a significant long term finance product that typically covers a large chunk, if not the majority, of your hotel's value. Both freehold and leasehold hotel developments require mortgages - but often the type of mortgage, terms and amount all vary depending on a number of factors. For that reason, it's important for business owners to work with knowledgeable advisors to find and secure this type of loan.
So, if it's a hotel mortgage you need and you're ready to kick off your application - or you simply have some questions about the process - then get in touch with Rangewell and our helpful team will support you through the process and ensure the end result meets your needs both for now and the future.
Why do you need a commercial mortgage for your hotel?
A commercial property requires a significant upfront investment, typically this comes as a deposit and mortgage. There may also be other types of loans in the mix, such as hotel development finance or ongoing cash flow support like merchant cash advance.
A hotel mortgage is secured against the value of your property and is repaid on a long-term basis. Typically, this is between 3-30 years, however, each loan is different and your lender will provide with you a number of options available to you.
Unless you have the cash up front to purchase a hotel outright then you'll need a commercial mortgage. Finding the right product to suit your needs depending greatly on your application including the information you provide and your past experience in the industry. These factors alongside the wide variety of commercial mortgage products available on the market mean that applying for a hotel mortgage can be time-consuming and confusing without proper guidance and support.
Here at Rangewell, we work with hotel owners and developers from application stage through to the release of funds, and even when it comes time to refinance. As independent brokers, we have access to the whole of market including a number of specialist lenders who work with hotels of all sizes.
So, whether this is your first hotel project or you require a mortgage for another addition to your portfolio, then speak to Rangewell today and begin your application the right way. Or, visit our comprehensive guide to learn more about hotel commercial mortgages.
How do hotel mortgages work?
Mortgages might be a familiar concept for both residents and commercial property owners, but hotel mortgages come with their own guidelines to consider.
When it comes to mortgaging a hotel, your lender will consider your application against certain criteria. This may include an assessment of your background in the hospitality industry, operational performance of any relevant businesses in your name, your hotel's projected performance and even any occupancy rates and other figures provided by the previous owner. The application process for a hotel mortgage is very in-depth as it is usually for a significant amount of money, even if you are only purchasing a small B&B or guesthouse then you will require a large sum from the lender.
First-time buyers may be subject to even more stringent processes, as lenders determine their funding based on risk and if this is your first project of this type or scale then you may be seen as a bigger risk than an experienced developer. That's not to say first-timers can't secure a good commercial mortgage, however. It simply means that you need to ensure your application is the best it can possibly be and you have included a comprehensive business plan that shows you understand any potential risks and are taking measures to negate them.
Hotel bridging loans
Since the application process for a hotel mortgage may take a while, you may find it useful to tap into another type of business loan, such as a hotel bridge loan, to cover any short term financing gaps. To gain access to the best short term finance to keep your hotel purchase on track, speak to Rangewell's advisors today and we'll help to assemble a jigsaw funding package tailored to your needs.
Hotel lending guidelines
Back on the subject of commercial mortgages, you'll need to make sure you have a fully comprehensive business plan that takes into account all aspects of your hotel business. This should include financial accounts, growth projects, operational structure and an overview of your sales and marketing strategy. Not only is this document important for you as a business owner, but it will also show the lender that you have taken the time to understand your market and you are entering this project on strong foundations.
While we recommend speaking to one of our advisors about the specifics of your project, it's still beneficial for you to become acquainted with the questions that the lender might ask, such as:
- Is this a new or existing hotel? If the latter, how long has it been operational for?
- Will the hotel remain open or will you need to close for renovations?
- What level of renovations or refurbishment is required?
- How many staff are currently working at the hotel?
- Will the commercial mortgage meet all of your finance requirements or do you require other funding to cover a shortfall or development gap?
- What deposit can you afford? Remember, a hotel mortgage usually requires a significant deposit (around 40% or more).
Once the lender is well-acquainted with your application and has a full understanding of what you hope to achieve, they will determine whether you are eligible for a commercial mortgage and what terms they can offer.
To find out which commercial loans you can access and how it can best work for you, speak to Rangewell today.
Hotel mortgage rates
Commercial lenders see mortgages as a good investment as they are secured against a physical asset, however, there are other factors to consider to ensure you get the best rates. Often, the best mortgages rates are offered by the largest commercial lenders to the most experienced developers. However, even if you lack specific experience, a strong application and accompanying business plan can support your application and open the door to better rates for your hotel development.
Here are some factors that impact commercial mortgage rates:
- Your experience in the sector - whether you have delivered similar projects before or even worked as a lead within another developer's hotel project.
- Your business plan - make sure to include as much information as possible about the hotel, including financial accounts and operational structure.
- The economy and the lenders themselves - here are a lot of external factors that will impact what a lender is able to offer you at this time.
- Past performance and occupancy rates - if you are buying an operational business, the hotel's past performance may impact the lates
- Your investment - the capital you can put into the project, along with the capital stack of all finance in the hotel, will make a significant difference.
Since there are so many factors at play, it's important that you work with experts on your finance application to ensure you get the best possible rates for your project. Speak to Rangewell today to get started with your hotel mortgage application.
Hotel commercial mortgages from Rangewell
From supporting with the application process through to determining which type of loan is right for you, we've got you covered. At Rangewell, we are finance experts, including commercial mortgage brokers, so we understand the challenges facing hoteliers applying for commercial mortgages in the current climate.
The hotel industry is always changing, so you'll need experienced advisors on your side to make sure you get the best possible deal for your hotel mortgage. Start your commercial mortgage application today, get in touch with Rangewell.