If you’re having trouble getting a condotel loan or financing a luxury condominium, you’re not alone. Many property owners and investors are looking to diversify their portfolios while rates are still low. But conventional guideline restrictions on condotels and non-warrantable condos have made it a little more challenging to apply and get approved.
Well-qualified borrowers with good credit, solid income, and high net-worth can find themselves hitting new challenges when financing non-warrantable condos, condo-hotels, and condotels.
The good news, financing is available, and getting approved for a condotel loan is easier than you might think.
Financing Condotel Loans: How it Works
Condotel is a mixed term that combines “condominium” and “hotel.” A condotel, or condo-hotel, is a unique style of property ownership that operates as both a residence and a rental unit. Each condotel is typically part of a large-scale property that operates similar to a hotel, including onsite staff, hotel-style amenities and resort features.
Condotel owners typically hold a standard mortgage and use their property several weeks a year as a vacation spot or second residence. When it’s not in use, owners can rent their unit. Since condotels are designed to be rented, they’re often located in tourist spots.
Owning a condotel has similar benefits to other types of homeownership, with the added benefit that condotels are designed to be rented out much of the year. With hotel-style amenities and onsite staff, the process of renting and maintaining the condotel is relatively effortless for the owner.
Why It’s Difficult to Get a Condotel Loan (And Then Easy)
The number of mortgage lenders who finance condotels is limited. Condotels, by definition, are considered non-standard mortgages, and most condotel properties and buildings do not meet the loan requirements of Freddie Mac or Fannie Mae.
For this reason, some borrowers have the impression that financing a condotel loan will be difficult. But many niche lenders still offer loans for qualified borrowers.
To apply for a condotel loan, you’ll need to find an approved lender who underwrites condotel loans. Doing your own research can be time-consuming (and each lender will pull your credit report, which could impact your credit score).
The smart move is to work with an experienced mortgage broker. If you’re ready to apply for a condotel loan, your mortgage advisor can make sure you get the best loan terms at the lowest rate possible.
A qualified mortgage advisor can submit your application to the right lenders so that your condotel mortgage gets approved and fits your financial goals.
How to Get Approved For a Condotel Loan
Once you connect with a qualified mortgage broker, getting approved is fairly simple.
Since we partner with multiple lenders across the industry, we can go beyond traditional loan restrictions and get direct access to lenders that meet your financial credentials.
The next steps are straightforward: verify your income, assets, and your credit score. Once we have a bigger picture, we can discuss different condotel loan options and secure a mortgage with advantageous loan terms and a low rate.
Like other non-traditional mortgages, a condotel loan will require the borrower to provide a down payment toward the property. The amount depends on various factors, and each package will look slightly different depending on the lender.
Typically, a minimum down payment of 20% will be required. Maximum LTV (loan-to-value) is often 60-75% depending on whether the condotel is a second residence or an investment property. Cash-out refinancing is also available.
Getting a mortgage for a condotel is easier than you might think. While there are some challenges, an experienced mortgage broker can work to help you get approved for a condotel loan quickly. Qualified borrowers will have a solid income, a high credit score, and the ability to make a down payment.
Financing a condotel is easier than you might think. Working with an experienced mortgage broker gives you access to approved lenders for a mortgage with the best terms and low rates. So if you’re thinking about financing a condotel loan, give us a call. We can help.