Finance and Mortgages for Hotels - Expert Mortgage Advisor (2023)

Last reviewed on 15th February 2023

The hospitality sector took a huge hit due to the Covid-19 pandemic. That being said, it’s also presented an opportunity for those wishing to buy hotels at a reduced rate. Furthermore, commercial lenders will still consider mortgages for hotels if the proposal is viable.

Our experts specialise in commercial mortgages for hotels. Whether you want to purchase an existing hotel or you require finance to refurbish and convert a building into a hotel, we can help. There are many different mortgages and financial products available to suit your plans.

Our advisors specialise in commercial finance and can help you with your hotel mortgage from start to finish.

What’s in this guide

  1. How can I get a mortgage for a hotel business?
  2. What do I need to apply for a hotel mortgage?
  3. How can I get the best mortgage rates for my hotel?
  4. Which type of finance should I use to buy a hotel?
  5. Specialist advice for hotel finance

How can I get a mortgage for a hotel business?

Commercial lenders will approve your application based on its credibility. Various factors will also affect your chances of getting a mortgage, which include:

  • Is the hotel already a running business?
  • Does the hotel need extensive refurbishment?
  • The number of years the hotel has been trading
  • Amount of employed staff
  • Is your lender suitable for this project?
  • Does the loan meet your requirements or is there a shortfall?

You’ll need to ensure your lender understands your plans once you become a hotelier. For instance, will you be taking over the building, or will you be spending part of the loan on improvements? Depending on your goals, certain lenders will be more suitable. Applying with a lender that isn’t suitable will result in a declined application, so you’ll need to plan ahead.

What do I need to apply for a hotel mortgage?

Each lender that works in the commercial sector will vary in what they’ll require before approving hotel finance. The lenders available will also depend on whether you’re purchasing an existing hotel business or building a hotel from scratch.

(Video) Purchasing a Hotel With SBA Loan | Hotel Marketing

That being said, many lenders will require applicants to have the following:

  • Business plan
  • Experience in running a hotel business
  • Hotel KPI (when buying an existing hotel)
  • Income projection and trading accounts where possible
  • Minimum 30% deposit
  • Good credit score
  • Ability to offer security

Every lender will want to see solid proof that your proposition is viable. To do this, you must demonstrate the viability of your business and this will ultimately come from the documents you provide.

In addition, you’ll also need a good credit score and a 30% minimum deposit. Any less than this and you’ll struggle to find a lender. Being able to offer security will also help your application.

Having a good business plan

You’ll need an in-depth business plan before applying for hotel finance. This is because lenders need to assess whether your plan is realistic and if projections meet the loan requirements.

Although lenders will be able to assess past revenues with existing businesses, they’ll still need an indication of future plans. Lenders may also adjust their LTV ratios depending on the solidarity of your business plan.

Experience in the hospitality sector

Experience in running a hotel would be preferred, but having experience in the hospitality sector is a must. The greater the experience you have, the stronger your application becomes.

Lenders carry out their assessments to establish the amount of risk involved with your loan. You can greatly minimise a lender’s concerns by having a great deal of experience with hotel businesses. In contrast, having little experience will make it very difficult for you to get approved.

Having qualifications such as degrees in hospitality or hotel management can also help your application.

Hotel key performance indicators

If you’re buying an existing hotel, lenders will want to see the hotel’s key performance indicators (KPI). As with any business, a KPI will give an indication of the hotel’s performance.

Lenders will require details of the occupancy rates and revenues. They’ll then calculate the revenues per available room (RevPAR) and the average daily rates (ADR) to establish how well the hotel is performing.

If your figures are below average, lenders will want to see how you plan on raising revenue to an at least average level.

Income projection and trading accounts

If you’re buying an existing business, lenders prefer to see at least two years of accounts. If you don’t yet have two years accounts, some specialist lenders may still consider you.

(Video) Hotel Financing: What You Need to Know

The key here is to demonstrate that your hotel will generate enough profit to repay the loan. Improving the profitability of a business should also be part of your business plan, especially if your figures fall short.


The location of your hotel will be a key factor in how successful your business can be. Buying a hotel that’s in close proximity to city centres, retail parks, entertainment centres, office buildings and other commercial buildings will give your application a huge boost. Furthermore, having transport and access links will also support your proposal.

If you’re buying in a derelict area, then lenders will question your application. Unless the hotel has a brilliant track record, you could otherwise struggle to be approved. Selling a hotel also becomes a lot easier when located in a prime location as opposed to somewhere that’s less desirable. This is another reason why lenders may become hesitant.

How can I get the best mortgage rates for my hotel?

The rates you’re offered will be based on the strength of your application. For instance, having experience in this sector in addition to having a credible business plan should give you access to the best rates possible.

Lenders will base their assessment on risk. For instance, applicants with vast experience will be considered lower risk than those who are buying their first hotel. Furthermore, business plans with stronger evidence of income will also help to unlock better mortgage rates.

Our experts can assess your application and give you areas in which you can make improvements, if necessary. Doing so can ensure your proposal is at its best, which can unlock better rates than you otherwise wouldn’t have access to.

Which type of finance should I use to buy a hotel?

There are a number of finance options available when buying a hotel. Buying a hotel is possible with the following forms of finance:

  • Commercial mortgage
  • Asset finance
  • Development finance
  • Refurbishment finance
  • Business loan
  • Bridging loan

Asset finance

Asset finance can also be a suitable option to purchase a hotel. This is especially true if your hotel requires additional furniture rather than a refurbishment. Using asset finance is also suitable for buying equipment such as computers and other office equipment.

If your hotel doesn’t require much equipment but would benefit from a renovation, then refurbishment or development finance could be better suited.

Business Loan

Depending on your circumstances, it may be possible to purchase a hotel with a commercial mortgage. That being said, if you only require a small amount of capital, a business loan may be more suitable. This is quite common for purchasing existing hotel businesses.

Development finance

If you’re building a hotel business from scratch, you may benefit from development finance. This would include funds for the build and internal refurbishment of the project. Funds are released in stages which can be advantageous. This is because you’re only charged interest on each part of the loan as it’s released. Furthermore, lenders will assess whether each development stage passes its criteria.

If you already have a building that you simply want to renovate, refurbishment finance could be a better option.

(Video) Hotel Loans - Motel Financing - Hotel Mortgage

Bridging finance

Bridging loans can also be suitable for purchasing a hotel, especially if you need to meet tight deadlines such as buying at an auction. Nonetheless, you’d need an exit strategy so you’d eventually need a more sustainable type of long-term finance, such as a commercial mortgage.

A bridging loan is a type of short-term finance, with terms rarely exceeding three years. The good news is that bridging can be approved very fast when compared to other methods of borrowing.

Specialist advice for hotel finance

Buying a hotel is completely different from purchasing any other building. The process can be overwhelming for many as the assessment is extremely intricate. As discussed, lenders will delve into your business plan as well as the current or projected revenue of the business.

While you may think one type of finance is suitable, we may be able to find a more suitable product. This is because a hotel business can be purchased using more than one type of finance. Our experts will then liaise with lenders on your behalf to ensure that they’re satisfied with what you’ve provided. If lenders do have any concerns, we can then provide the documents required to get the loan approved.

Trying to purchase a hotel by directly going to a lender can be extremely difficult. If you are refused for any given reason, it can have a negative impact on applying for finance in the future. This is why speaking to an expert beforehand can be so crucial.

You can make an enquiry to get a more in-depth idea of what’s required for your individual situation. Our experts will then guide you further on whether or not your proposition is viable before approaching lenders.



(Video) How to Build a Spa Hotel 3 Statement Excel Financial Model

About the author

Martin Alexander

More Articles

(Video) A Contractors Guide To Personal Finance | Mortgages & Buying a Home

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.


What should you not say to a mortgage broker? ›

1) Anything Untruthful

Lying to a mortgage lender can ruin your chances at approval. On top of that, providing misleading info on a loan application is a felony. Welcome to mortgage fraud! You can try to hide certain info, but lenders are required to perform verifications of key financial documents.

What questions are asked in a mortgage interview? ›

How to prepare for a mortgage interview: Questions & Answers
  • What is a mortgage interview for? ...
  • What type of job do you have and how much do you earn? ...
  • How much are your monthly outgoings? ...
  • Do you have existing debts? ...
  • How good is your credit history? ...
  • Do you have any children or dependents?
Dec 1, 2022

Can a mortgage advisor get you a better deal? ›

An adviser might also be able to find a deal you can't find on your own. They can also improve your chances of being accepted for a mortgage as they'll know which lenders are best suited to your particular circumstances.

Can I get a mortgage without 2 years tax returns? ›

Lenders typically want to see at least a two-year history of tax returns to verify that your self-employment income is stable and reliable. Fortunately, some borrowers can use just one year of tax returns to qualify for a mortgage.

What are three common mortgage mistakes? ›

Take a look at these 10 common mortgage mistakes to help ensure they don't cost you the home of your dreams.
  • Not Getting Preapproved. ...
  • Not Checking Your Credit Score First. ...
  • Not Considering Mortgage Insurance. ...
  • Not Shopping Around for a Mortgage. ...
  • Not Keeping Closing Costs and Fees in Mind.
Jan 17, 2023

What mortgage lenders don t want you to know? ›

Secrets Mortgage Lenders Don't Want You to Know
  • You don't need a perfect credit score. ...
  • There's no such thing as “no closing costs” ...
  • You can make extra principal-only payments. ...
  • A 30-year loan isn't your only option. ...
  • You can shop for mortgage lenders. ...
  • Mortgage forbearance is possible.
Jul 25, 2022

What are the 5 C's of mortgage lending? ›

What are the 5 Cs of credit? Lenders score your loan application by these 5 Cs—Capacity, Capital, Collateral, Conditions and Character.

How difficult is the mortgage exam? ›

Is the NMLS Test Difficult? According to the Nationwide Multistate Licensing System & Registry (NMLS), the national NMLS test pass rates are 55% for the first attempt. For those who do not pass on their first attempt, NMLS test pass rates fall to 43% for later attempts.

What are the 5 parts of a mortgage? ›

Your monthly mortgage payment typically has four parts: loan principal, loan interest, taxes, and insurance. Making one payment to cover all four parts means you only have to remember one due date.

How much commission does a mortgage advisor make? ›

Almost all mortgage brokers are paid commission by the lender, usually of between 0.35% and 0.4 % of the total mortgage. Some mortgage brokers also charge a fee to their customers.

How much do mortgage advisors make a year? ›

average mortgage broker salary

Your earnings will range from £45,000 to £60,000 per year. Highly experienced professionals in the field take home huge salaries of over £70,000 annually. Aside from the basic salary, mortgage brokers also earn commissions for every successful loan application and approval.

What percentage do mortgage advisors make? ›

Most independent mortgage advisors get paid a commission by the lender you ultimately choose as your mortgage provider. This is sometimes known as a procuration fee, and is around 0.35% of the mortgage value.

Can I be denied for a mortgage if I owe taxes? ›

While homeownership is a goal for many people, owing taxes to the IRS can make conventional mortgage approval challenging. Lenders extensively examine your debt-to-income ratio (DTI), and tax liabilities adversely affect it.

How far back do underwriters look at tax returns? ›

When you apply for a mortgage, your lender is likely to ask you to provide financial documentation, which may include 1 to 2 years' worth of tax returns.

How far back do mortgage lenders look at tax returns? ›

Mortgage lenders ask for tax returns, often two years, to verify that you have the income, investments, and other holdings that you say you do. Mortgage lenders will also ask for proof of employment and salary, as well as retirement holdings.

What is the 3 7 3 rule in mortgage? ›

Timing Requirements – The “3/7/3 Rule”

The initial Truth in Lending Statement must be delivered to the consumer within 3 business days of the receipt of the loan application by the lender. The TILA statement is presumed to be delivered to the consumer 3 business days after it is mailed.

What are the four C's of mortgage lending? ›

Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.

What is the 1/3 Rule mortgage? ›

You should be spending no more than 30% of your gross income on a monthly mortgage payment, have at least 30% of the home's value saved up in cash or semi-liquid assets, and buy a home valued at no more than three times your annual household gross income. Visit Business Insider's homepage for more stories.

What is the highest credit score you can have without a mortgage? ›

Depending on your age and credit history, it may be challenging for you to reach a perfect credit score of 850. It's possible, but you'll need to have a very low credit utilization rate and a robust credit history. But achieving a credit score of 700 or higher is entirely possible.

What is the lowest credit score allowed for a mortgage? ›

The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable rate mortgages (ARMs).

Do mortgage lenders check every bank account? ›

Yes, a mortgage lender will look at any depository accounts on your bank statements — including checking accounts, savings accounts, and any open lines of credit.

What is the 15 3 payment trick? ›

The 15/3 hack claims you can dramatically help your credit score by making half your credit card payment 15 days before your account statement due date and the other half-payment three days before.

What are the types of underwriting? ›

There are three kinds of underwriting, namely loans, securities, and insurance. Underwriting is a crucial process in the financial world because it helps investors make profitable investment decisions.

Why do so many people fail the NMLS test? ›

The reason most people fail the NMLS exam is that they don't study, pay little attention in their pre-licensing class, panic when they don't understand a question or read the questions too fast. This test is extremely important to your career, so prepare for it seriously.

Is it hard to pass the MLO test? ›

The SAFE MLO Test is Difficult, But Why? As an aspiring Mortgage Loan Officer (MLO), there are certain steps you need to take to obtain your license, including taking and passing the SAFE MLO Test. Failing this test is a shared experience for new MLOs, with only 57% of test takers passing on their first attempt.

Is being a mortgage agent stressful? ›

Mortgage brokers often have to find their own clients, which means you need to be out, meeting new people and putting your work out there. This can be extremely uncomfortable and stressful for many people.

What are the 2 main types of mortgage loans? ›

All types of mortgages are considered either conforming or non-conforming loans. Conforming versus non-conforming loans are determined by whether your lender keeps the loan and collects payments and interest on it or sells it to one of two real estate investment companies – Fannie Mae or Freddie Mac.

What are 6 types of mortgage? ›

There are six different mortgage types in India, such as simple mortgage, usufructuary mortgage, English mortgage, mortgage by conditional sale, mortgage by title deed deposit, and anomalous mortgages, which are further explained below.

What are the 3 major parts of a loan? ›

Components of a Loan
  • Principal: This is the original amount of money that is being borrowed.
  • Loan Term: The amount of time that the borrower has to repay the loan.
  • Interest Rate: The rate at which the amount of money owed increases, usually expressed in terms of an annual percentage rate (APR).

Do mortgage advisors get paid by lenders? ›

Most tied brokers will be paid through commission, this will be a percentage of the mortgage loan you receive. This is usually around 1%. You'll pay this directly to the lender, and they'll also receive commission from the lender themselves.

Can mortgage brokers make millions? ›

Pitching government loans, top mortgage officers can make millions a year, according to Jim Cameron, senior partner at Stratmor Group, a mortgage industry advisory firm. Brian Decker works at LoanDepot in Riverside County, Calif., where he sold more than $200 million worth of home loans last year.

Do mortgage brokers make a lot of money? ›

Payscale puts the average salary of mortgage brokers at $58,304, based on 72 reports, and notes commissions ranging from $12,000 to $178,000. Brokers with less than one year of experience earned average total compensation of $46,750, it says, while those with at least 20 years of experience averaged $68,784.

How many hours does a mortgage advisor work? ›

Mortgage Advisor working hours

Full-time, you would generally be working between 35 and 40 hours a week between Monday and Saturday.

Is mortgage 7 times salary? ›

Habito's fixed-rate residential mortgage, which now allows you to borrow up to 7 times your salary, is called Habito One. It has a single fixed rate for up to 40 years, so your monthly repayments stay the same throughout the entire term, and you can choose to have no exit fees should you change your mind at any stage.

How long does it take to become a qualified mortgage advisor? ›

You could train through an advanced apprenticeship as a mortgage adviser. It typically takes around 12 months to complete through a mix of learning on the job and study.

Does a mortgage advisor do everything? ›

The day-to-day role of a mortgage advisor

Your role is to help clients find and apply for the right mortgage for them. In order to do this you'll need to get to know a bit about them and their finances to offer informed, professional advice.

Are mortgage advisors in demand? ›

Prospects for a career in mortgage advice

Despite recent economic challenges, careers in mortgage advice are an excellent choice in the present climate. The demand for mortgages is expected to remain high, and a nation of property owners will always need expert mortgage advisors.

How do mortgage advisors get leads? ›

There are also finance and mortgage networks that Mortgage Advisors can join which can help acquire leads.
Go to networking events
  1. Ask great questions.
  2. Treat people like friends.
  3. Take notes.
  4. Set reasonable expectations.
  5. Be yourself.
  6. Treat connecting like a puzzle.
  7. Ask yourself why they should care.
  8. Be engaged.
Sep 26, 2022

What can stop you being accepted for a mortgage? ›

Common reasons for a declined mortgage application and what to do
  • Poor credit history. ...
  • Not registered to vote. ...
  • Too many credit applications. ...
  • Too much debt. ...
  • Payday loans. ...
  • Administration errors. ...
  • Not earning enough. ...
  • Not matching the lender's profile.

Do underwriters always pull tax transcripts? ›

Yes, mortgage companies and underwriters verify your tax returns with the IRS. The lenders will request the tax transcript directly from the IRS to ensure that your application is not fraudulent.

How much debt can I have and still get a mortgage? ›

Although certain lenders will accept DTIs up to 50 percent, lower is better. In terms of your front-end and back-end ratios, lenders generally look for the ideal front-end ratio to be no more than 28 percent, and the back-end ratio, including all monthly debts, to be no higher than 36 percent.

How close to closing is underwriting? ›

Underwriting can take a few days to a few weeks before you'll be cleared to close.

Can a loan officer override an underwriter? ›

While the underwriter and loan officer can be located in the same office, the loan officer may not attempt to influence the underwriter's decision. The loan officer may provide information to the underwriter and ask questions regarding reasons for approval or denial.

How often do you get denied in underwriting? ›

You may be wondering how often underwriters denies loans? According to the mortgage data firm, about 8% of mortgage applications are denied, though denial rates vary by location and loan type. For example, FHA loans have different requirements that may make getting the loan easier than other loan types.

What do underwriters look for loan approval? ›

Let's discuss what underwriters look for in the loan approval process. In considering your application, they look at a variety of factors, including your credit history, income and any outstanding debts. This important step in the process focuses on the three C's of underwriting — credit, capacity and collateral.

What can a lender not ask? ›

Because of the Equal Credit Opportunity Act (ECOA), lenders are prohibited from discriminating against you because of your age, marital status, national origin, race, religion, sex, sexual orientation, and if you receieve income from public assistance programs.

How many years do banks look at for mortgage? ›

The typical timeframe is the last six years. Your credit history is one of the many factors that can affect your ability to get approved for a mortgage and a lender can pull up one of your credit reports to see financial information about you, within minutes.

What questions are mortgage lenders not allowed to ask? ›

Because of the Equal Credit Opportunity Act (ECOA), lenders are prohibited from discriminating against you because of your age, marital status, national origin, race, religion, sex, sexual orientation, and if you receieve income from public assistance programs.

Is it good to talk to a mortgage broker? ›

If you're ready — or even considering refinancing — it's a good idea to chat with a broker. They'll be able to calculate the potential savings for your situation or help you plan ahead (eg. if your fixed rate mortgage is ending soon), plus help with the heavy lifting once you've chosen your preferred option.

What do you discuss with a mortgage broker? ›

The amount you can borrow on a mortgage will depend on a number of factors, not just your income. The mortgage adviser will run through an affordability questionnaire that asks questions about your employment, income, amount of credit you currently have, your credit score and your credit history.

What should I be careful of when getting a mortgage? ›

If you're thinking about getting a mortgage, you should be aware of the factors that affect your eligibility. These include credit score, length of time in your current job, current debts, whether you're self-employed or not, and the size of your deposit.

What are red flags for lenders? ›

Complying with the Red Flags Rules

These may include, for example, unusual account activity, fraud alerts on a consumer report, or attempted use of suspicious account application documents.

Can you be denied a mortgage after being approved? ›

Can a Mortgage Be Denied After Preapproval? Yes, it's possible to have your loan application denied after getting preapproved for a mortgage. It doesn't seem fair, but the reason this is possible is because your loan has to go through the underwriting process before it's finalized.

What are the common reasons a mortgage application is denied? ›

Common Reasons a Mortgage Loan is Denied
  • Bad credit. According to Experian, the average FICO score in the U.S. was 714 in 2021. ...
  • Low appraisal. ...
  • Limited down payment and closing funds. ...
  • High debt-to-income (DTI) ...
  • No credit.

How stressful is being a mortgage broker? ›

If you're a mortgage broker you're very likely to be working those long hours. And it's that, plus high stress levels in the job that are causing broker burnout and with it, bringing mental health and wellbeing issues into focus.

What 3 documents a mortgage broker should have in the first client interview? ›

Supporting documents include payslips, group certificates, records of savings, bank statements, credit card statements, other loan statements and driver license or other ID.

Is it better to go through a bank or a mortgage broker? ›

A mortgage broker can offer a wider array of options and streamline the mortgage process, but working directly with a bank gives you more control and costs less.

Is a mortgage broker a difficult job? ›

The work is extremely flexible, but the downside is, you must be self-disciplined. At the end of a busy day, there will still be calls and email to return. If you can manage these tasks, and develop a positive reputation, you may find that being a mortgage broker is a rewarding career to have.

Is being a mortgage broker hard? ›

Mortgage brokers often have to find their own clients, which means you need to be out, meeting new people and putting your work out there. This can be extremely uncomfortable and stressful for many people.

What do you need when speaking to a mortgage advisor? ›

Mandatory documents
  • Last three months' bank statements.
  • Last three months' wage slips and details of any guaranteed overtime, bonus or commission.
  • If you are self-employed, you'll need to bring the last three years' proof of accounts.
  • Any details of existing mortgage/loans or credit card commitments.

What is the most important mortgage to avoid? ›

With their changing interest rates, adjustable-rate mortgages (ARMs) are a particularly risky choice for borrowers with less-than-ideal financial situations.

Can I get a mortgage at 66 years old? ›

Although some lenders set their own maximum age limits, there is no maximum age for applying for a mortgage – so yes, mortgages for pensioners do exist. The golden rule is simply the same as for any mortgage: you need to prove you can repay the loan, one way or another.

What negatively affects mortgage approval? ›

New loans, big purchases, job changes or large, unexplained bank deposits could jeopardize or delay final mortgage approval.


1. Financing Options for a Boutique Hotel, SBA Financing Options, and MORE! [Q&A]
(Investor Financing Podcast)
2. What is a Hotel and Motel Business Loan and Why Should You Apply for One?
(First Union Lending)
3. Casino Hotel Excel Financial Model
(Oak Business Consultant)
4. Cracking the Code: Raoul Pal's Ultimate Guide to NFTs
(Real Vision Crypto)
5. Commercial Real Estate Loan, Private Money, Hard Money, Apartments, Hotel, Financing,Strip Malls
(Donny Commercial Real Estate Mortgage Expert)
6. Hotel Real Estate Investment – A Successful Journey To Financial Freedom
(The Land Geek)
Top Articles
Latest Posts
Article information

Author: Stevie Stamm

Last Updated: 08/04/2023

Views: 5536

Rating: 5 / 5 (80 voted)

Reviews: 95% of readers found this page helpful

Author information

Name: Stevie Stamm

Birthday: 1996-06-22

Address: Apt. 419 4200 Sipes Estate, East Delmerview, WY 05617

Phone: +342332224300

Job: Future Advertising Analyst

Hobby: Leather crafting, Puzzles, Leather crafting, scrapbook, Urban exploration, Cabaret, Skateboarding

Introduction: My name is Stevie Stamm, I am a colorful, sparkling, splendid, vast, open, hilarious, tender person who loves writing and wants to share my knowledge and understanding with you.