Mortgage Financing For Condotels
This guide covers mortgage financing for condotels. Both condo-hotel unit buyers and owners are having an extremely difficult time buying and refinancing their condo hotels. Most condo hotel owners have their mortgages with previous condo hotel lenders who no longer finance condotels. Big banks like J.P. Morgan Chase, Wells Fargo, Bank of America, and Citibank have set a policy that they are not going to touch condotels. This holds true even though they have preferred borrowers who they have financed them.
Majority of condotel unit owners have their financing for condotels with regional and local banks while others have it financed with their credit union. Again, the same answer. Lenders will not entertain condotel financing.
Existing portfolio lenders will no longer touch fnancing condotel units. Lender will not refinance the condominium units they already have a first position in. The majority of condotel unit owners have interest rates north of 7.0%. Condo hotel unit owners’ current lenders want no part in refinancing their current condotel unit loans.
What is a Condotel Unit
A condotel, also known as a condo hotel or hotel-condo, is a mixed-use property that combines aspects of a residential condominium and a hotel. Here are some key features of condotels:
- Ownership Structure: Individuals can purchase a unit or suite within the condo hotel development as a real estate investment. They own the property and have a deed, just like a traditional condo.
- Hotel Amenities/Services: While owners can use their units, the condotel operates like a full-service hotel when units are vacant.
- Amenities may include a front desk, room service, housekeeping, pools, restaurants, etc.
- Rental Program: Owners can place their units into a rental program run by the hotel management company. The hotel rents out the owner’s unit to guests when the owner is not using it. Owners receive a portion of the rental revenue.
- Dual Zoning: Condotels have zoning that allows both residential and commercial hotel uses.
- Potential Income: In addition to rental revenue, owners can see appreciation if the property values increase over time.
The main appeals of condotels are the potential for rental income when not using the unit personally, access to high-end hotel amenities, and professional management handling operations. However, there are risks such as rental income fluctuations, hotel management conflicts, and challenges around financing and reselling condotel units compared to typical homes or condos. Talk to our expert for condo mortgage
Update on Mortgage Financing For Condotels
Mortgage financing for condotels is now back in full swing and more popular than ever. Gustan Cho Associates are experts in condotel and non-warrantable condo financing. In this article, we will discuss and cover mortgage guidelines on condotel and non-warrantable condo financing. Condotel financing is tougher now than it has ever been. Fortunately, Gustan Cho Associates can help financing on condotels. Condo hotel owners needing portfolio loans for condotels to purchase, do a rate or term refinance, or do a cash-out refinance mortgage on primary, second homes, or investment condotel units can get qualified and approved at Gustan Cho Associates. Gustan Cho Associates can has different options on mortgage financing for condotels.
Property Guidelines on For Mortgage Financing For Condotels
Every wholesale portfolio lender has different guidelines on mortgage financing for condotels. However, the majority of wholesale condotel and non-warrantable portfolio lenders require the following general guidelines. Non-warrantable and condo hotel wholesale portfolio lenders require the following general guidelines:
- Unit needs to be at least 500 square feet
- Condo Unit needs to have a full kitchen and have at least one bedroom
- 75% loan to value for rate and term refinancing
- 25% down payment required on purchases
- 30-year fixed-rate mortgages available
- 7/1 ARM, 5/1 ARM, 3/1 ARM
The index is based on the CMT (Cost Maturity Index). The margin is 3%. There is a clause stating when the mortgage interest rates adjust, it cannot go lower than the starter rate. 1 year of reserves which can be a combination of cash, stocks, bonds, and/or retirement funds. Two years of verifiable employment on full doc portfolio loans. Alternative financing and no-doc Non-QM mortgage financing for condotels and non-warrantable condos are available.
Occupancy Types on Mortgage Financing For Condotels
Condotel can be classified as a primary home, second home, or investment home. However, most condotel units are second home condo hotels. To be considered a second home condo hotel unit, the borrower cannot have more than the Condotel and their primary residence. If borrowers want pricing for a second home mortgage financing for condotels, the maximum number of properties they can own is their primary home and the subject condo hotel unit.
Condotel can be classified as an owner-occupied residence if the borrower does not own any other real estate besides the condo hotel unit. The second home classification and owner-occupied classification is important.
Second home condotel versus investment condotel unit classification is important because the borrower gets a reduction adjustment on the interest rate. Closing on condotels are faster than conventional mortgages. Most condotel refinance loans can close in 30 days or less. For more information, contact us at Gustan Cho Associates at 800-900-8569 or text for faster response. Or email us at gcho@gustancho.com. Condotels are most popular in resorts and major city-center hotels/mixed-use developments.
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