The commercial mortgage industry is a wide field that includes many types of real estate property. Hotel financing is one of the most complicated sectors of this industry. Lenders that deal with hotel properties base their programs and guidelines on various factors. Some of these include whether the hotel real estate is flagged or un-flagged, the size of the loan, age of the property, total population of the local area, STAR ratings and past financial performance.
A hotel commercial mortgage can be obtained for buying a hotel that’s already in business. It can also be used to building a new hotel, refurbishing a hotel, even refinancing a hotel for a better mortgage interest rate. This is especially more helpful for owner operators of hotel properties that are hoping to decrease their monthly mortgage payments with the new SBA refinance program in order to make higher profits. With the current mortgage interest rates being at all-time lows, this is the perfect time for hotel owners to take advantage of refinancing options that are now available to them. Here are two of these options:
Quick Close Private Financing
This option is available for hotel commercial property owners who are hoping to obtain funding in a matter of days. This financing option is available for many types of situations. It can help you get the cash you need to purchase land to build a hotel, or develop the land you already own. This allows you to make needed improvements and renovations to your hotel to make it more attractive and comfortable for your guests.
In today’s real estate market, many hotel owners are using quick close private financing to save their hotels from foreclosure. This gives them a better option than filing bankruptcy to keep their properties. Another use of this financing option is to pay off their mortgage at discount and then refinance it with a conventional loan. A lot of hotel and motel properties are underwater and many banks are willing to take these assets off of their books via offering discount to the owners. Private financing and or bridge loans are the most viable options for these types pay offs. By stabilizing their hotel operational and financials, borrowers can refinance their loans to a long term conventional mortgage thus save on total balance and interest rate.
Stated Income Hotel Commercial Loan
This option is available for most hotels, both medium and large in size. It allows for hospitality and lodging properties to be financed or refinanced based on the stated income of the borrower. Stated income hotel financing programs allow you to borrow for or against a property with the minimal amount of required income documents. This makes it much easier, faster and more reliable than traditional lender requirements.
With stated income programs, a hotel loan that was denied by banks can still be possible. Even if you were denied because you didn’t have all of the required documents to prove your income or because of credit issues, you can still get financing with stated income programs. Of course with this program, the rates are much higher and terms are shorter. Lenders underwrite the loan based on collateral and equity of the property more than anything else.
Non Bank SBA 504 Loans
SBA loans are used for owner operator of hotel properties and are one of the few programs available for many smaller lodging properties throughout the United States. However, many of these smaller mom and pop motel and hotel operators don’t have the continuous cash flow that is necessary to service their debt for many SBA lenders. To solve this challenge, many smaller lending firms pool investment money to finance these types of financially challenged properties. Since they are not regulated like banks, these lenders can finance with debt service as low as 1:1. What that means is that your property’s net income should break even with your loan payment. The rates on the first trust deed are slightly higher by combining it with the CDC’s second trust deed, the rates are actually very reasonable.