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UK Hotel Mortgages

UK hotel mortgages tend to be a specialist borrowing product. Below we explain how this type of lending works and what a hotel mortgage lender will look for in your application.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Mortgages For Hotels In the UK

Hotel mortgages are common in hospitality and tourism, and the Revolution team has helped hundreds of clients looking for commercial mortgage lending, either to invest in a hotel business or upgrade an existing property.

Here we run through the essentials to UK hotel mortgages - for more assistance, contact the mortgage brokers team on 0330 304 3040 or via email at [email protected].

Are there Specific Commercial Mortgages for Hotels?

There are indeed; lots of lenders offer hotel financing, although it is essential to compare costs and rates to ensure you are getting the best deal.

Lenders will look at several criteria, to determine the maximum they can lend - these include things like the business plan, profitability forecasts and current trading status.

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What are the Eligibility Criteria for a Hotel Mortgage?

Given the unique nature of each hotel business, a lender will assess every hotel mortgage application independently. The criteria they will look at include:

  • Your Experience as a Hotelier

If you are an experienced industry professional and have a track record, then you present a lower hotel mortgage risk and will achieve more competitive rates.

When investing in a business without being a hands-on manager, a lender will want to consider your key personnel. They may also look at licences and permissions in place.

  • Size of Hotel Business

Hotels make profits dependent on their capacity and level of occupancy. Lenders will assess the revenues achieved per available room, and your average daily rates to assist with affordability calculations.

If the hotel is new, or due to undergo refurbishment, a hotel mortgage lender is likely to ask for the business plan to see what the plans and projections look like.

  • Business Profitability

If you have two years of trading history and can demonstrate profitability, you will have more hotel mortgage lending options and be able to meet affordability criteria.

  • Hotel Marketing and Business Plans

To review the likely success of the business, a mortgage lender will ask for business plans and marketing strategies to assess the risk factor.

  • Location of the Business

Your location is key to the success of the hotel, where the bulk of the trade is reliant on tourism or convenience. If your hotel is close to a central location, entertainment venue, transport hub or popular attraction, hotel mortgage lenders will perceive the loan as lower risk.

While these are the most important criteria a lender will consider, there are always options to negotiate or liaise with lenders who specialise in niche lending. If you are a new hotel owner or don't have a track record of accounts, give the Revolution Brokers team a call on 0330 304 3040.

How Can I Get the Cheapest Hotel Mortgage Interest Rates?

If you can present a robust application that meets all of the lending criteria, you will be offered more competitive interest rates on a hotel mortgage.

For example:

  • Demonstrating industry experience.
  • Having acceptable occupancy levels.
  • Sharing a healthy marketing plan.
  • Providing information on projected profits.

Are There UK Hotel Mortgages for Refurbishments?

Indeed, you can apply for a commercial mortgage to finance a hotel refurbishment. The most efficient lending product will depend on the scope of the refurbishment, since smaller loans under £25,000 may be cheaper to finance through a loan.

If the renovation is significant, this could have a dramatic impact on profitability.

In this case, lenders will find it easier to finance the refurbishment.

Is There an Alternative to a Commercial Hotel Mortgage?

Hotel businesses have a range of lending options to choose between, such as:

Can I Use Asset Finance to Invest in a Hotel?

Asset finance means raising capital through security against assets, such as equipment, vehicles and property.

While this is a viable way for a hotel to raise finances, it depends on the budget required, as a more considerable investment or refurbishment might be better off funded through a commercial mortgage or loan.

Are There Bridging Loans for Hotel Purchases?

Bridging loans are a good option for fast hotel investments and are usually more flexible than hotel mortgages. This can be useful for investing via auction, or when a quick completion is advantageous.

This type of finance is short-term and usually lasts between one and three years. You will therefore need an exit strategy, such as mortgaging the property, or selling the asset, before a lender will be able to accept a bridging loan application.

Can I Apply for Development Finance to Invest in a Hotel Business?

Development finance is a good option for a new hotel build, or significant conversions and improvements.

This lending is similar to bridging finance in some ways, but the capital is released from the lender in tranches as stages of the build or refurbishment are completed.

As a plus point, you only pay interest on funding already drawn down.

Like a bridging loan, you'll need to have an exit strategy, and most lenders will want to assess this before they can make an offer.

Are There Business Loans for Hotels?

Yes, you can borrow via a business loan as a hotel business. Most small loans are limited to around £25,000 and are usually unsecured.

What Other Funding Alternatives are there for Hotel Businesses?

UK lenders offer a range of commercial lending for hotels, and the right option depends on what you want to borrow, for what reason, and for how long.

For example, if you have multiple investment properties, you could use a commercial remortgage to release equity.

The Revolution Brokers team are experts in commercial financing and can provide advice on the most cost-effective and suitable form of financing for your hotel business - give us a call on 0330 304 3040 to discuss.

What Deposit Do I Need for a Hotel Mortgage?

Typically, a lender will want at least a 25% deposit for a hotel mortgage, and up to 40% depending on the risk level and type of mortgage you are applying for.

That means deposits from 25% upwards to 40%, depending on how closely you meet the eligibility criteria.

Can I Get a 100% LTV Mortgage on a Hotel?

Hotel mortgages at 100% LTV are not standard, but they are possible. In this instance, you will need to provide alternative security, such as another asset, to offset the higher risk.

You should always consider the security offered, as this could be repossessed if you don’t keep up with the hotel mortgage repayments, and the lending is secured against another asset.

Do Lenders Offer Hotel Mortgages with Bad Credit?

As a hotel investor with bad credit, it can seem impossible to secure a hotel mortgage with a mainstream lender.

However, specialist commercial lenders can consider bad credit scenarios on their own merit. In this case, if you have a higher deposit, you have a better chance of securing the lending you need.

How Can a Mortgage Broker Help Me Find Hotel Finance?

Revolution Brokers are an independent, whole-of-market broker - with an experienced consultancy team who liaise directly with the most competitive hotel mortgage lenders in the UK.

We can also advise on the best forms of hotel mortgage financing, and help you analyse cost comparisons to make the most informed decision.

We can also advise on the best forms of financing, and help you analyse cost comparisons to make the most informed decision.

Professional Support with Commercial Hotel Mortgages

Whether you are looking for a hotel mortgage to invest in a new business or want expert recommendations on raising finance to support your hotel, the Revolution Brokers team can help.

Give us a call on 0330 304 3040 or send us a message to [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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