Condo Hotel Mortgages

Condo Hotel Mortgages: Your Guide to Buying or Refinancing a Condo Hotel Unit in 2024

Condo hotel mortgages are back and becoming more popular than ever. If you’ve ever dreamed of owning a condo in a luxury hotel or if you’re looking to refinance a condo hotel unit, this guide is for you. Condotel financing cannot be financed through conventional loans. Fannie Mae and Freddie Mac does not buy non-warrantable condo loans on the secondary market. Condo Hotel Mortgages are originated and funded by non-QM wholesale lenders.

In this article, we’ll break down everything you need to know about condo hotel mortgages, including the financing options for purchasing or refinancing a condotel. Whether buying a home for the first time or an experienced investor, you’ll learn the basics of how these special mortgages work and what to expect in 2024.

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What is a Condo Hotel?

A condo hotel (also known as a condotel) is a hybrid between a condominium and a hotel. Condo hotel units are individually owned condos located inside a hotel. Owners can use these units as vacation homes and rent them out to guests when they’re not there.

Condotels are attractive because they provide the benefits of both worlds—you can enjoy a property that feels like a second home and generate rental income when you’re not using it. Condos in these hotel complexes are typically managed by the hotel, meaning you get professional services like housekeeping and maintenance for your unit. Speak With Our Loan Officer About Condo Loans

Why Condo Hotel Mortgages Are a Smart Investment

Condo hotels are a great investment, whether you’re buying for personal use or as a business opportunity. For many, they offer an affordable way to enjoy luxury living with the bonus of rental income. But to take advantage of these benefits, you must know the ins and outs of condo hotel mortgages.

Condo hotel mortgages are unique because they don’t fit traditional mortgage categories. You can’t finance them with conventional loans like those from Fannie Mae or Freddie Mac. Instead, you’ll need to use a non-QM (Non-Qualified Mortgage) lender specializing in financing these properties.

Can You Get a Condo Hotel Mortgage in 2024?

Yes, condo hotel mortgages are available in 2024! After being off the radar for several years, financing for condo hotels is making a big comeback. With interest rates starting to stabilize, now is a great time to explore this option, whether you’re looking to buy or refinance.

Here’s what you need to know about condo hotel mortgages in 2024:

Condotel loans are available from non-QM lenders: Big banks like Wells Fargo, Bank of America, and Chase have stopped offering condo hotel mortgages because these loans don’t conform to Fannie Mae or Freddie Mac guidelines. Instead, non-QM lenders step in to provide these specialized loans.
Flexible financing options: Condo hotel mortgages have more flexible terms than conventional loans. You might not need perfect credit, and the income requirements are less strict.
Competitive rates are back: Non-QM lenders offer competitive interest rates on condo hotel mortgages. However, rates for condo hotel mortgages may still be higher than traditional home loans because condotels are considered riskier investments.

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Buying a Condo Hotel in 2024: What You Need to Know

If you’re thinking of buying a condo hotel, it’s important to understand the key factors that will affect your mortgage approval. Here’s what lenders will be looking for:

1. Down Payment

Lenders will require at least a 25-30% down payment for most condo hotel mortgages. This is higher than a typical home mortgage because condotels are considered more of an investment than a personal residence.

2. Property Requirements

Your condo hotel unit will need to meet specific requirements. Most lenders will only finance condotel units that:

Are at least 500 square feet in size.
Have at least one bedroom and a functional kitchen.
Are located in a well-maintained hotel complex with no pending litigation or major building violations.

3. Loan-to-Value Ratio (LTV)

The loan-to-value ratio (LTV) measures how much of the property’s value you’re borrowing. Lenders typically offer 75% LTV for owner-occupied or second homes and 60% LTV for investment condotels.

4. Reserve Funds

Lenders want to ensure the hotel complex has enough reserve funds to handle maintenance and emergencies. Condo hotels with low reserves or financial instability may not qualify for financing.

Refinancing a Condo Hotel in 2024

Refinancing a condo hotel mortgage can be a smart move, especially if you’re currently stuck with a high interest rate from a big bank. Here’s what you need to know:

Why Refinance?

Many condo hotel owners who financed their units years ago are paying sky-high interest rates. Since big banks have stopped offering condo hotel financing, these borrowers have had limited options to refinance. Non-QM lenders are stepping in to help, and here’s why refinancing might make sense for you:

Lower your interest rate: With mortgage rates stabilizing, now is a great time to lower your interest rate and reduce your monthly payment.
Switch to better terms: If you’re currently on an adjustable-rate mortgage (ARM), you can refinance to a more stable fixed-rate mortgage.
Access equity: If your condo hotel unit has appreciated, you can use a cash-out refinance to access the equity you’ve built.

Refinancing Requirements

To refinance your condo hotel, most lenders will require that:

Your loan-to-value (LTV) ratio is 75% or lower for primary residences and second homes.
Your LTV is 60% or lower for investment properties.
You have a good payment history and no late payments on your current loan.

Appraisals for Condo Hotels: Why They Matter

Whether you’re buying or refinancing, you’ll need to get an appraisal for your condo hotel unit. Lenders will use the appraisal to determine the property’s current value and ensure you meet the LTV requirements.

One thing to remember: Appraising condo hotels can be tricky because there are often fewer recent sales to compare against. Lenders will want comparable sales (comps) from the same condo hotel complex or nearby properties. If there aren’t any comps, the lender may require two appraisals for an accurate valuation. Click Here To Get A Condo Mortgage Loans

What Happens if the Appraisal is Low?

If the appraisal comes in lower than expected, you have a few options:

Pay down your loan: You can pay the loan balance to meet the required LTV.
Contest the appraisal: If you believe the appraisal is unfair, you can request an appraisal rebuttal, but these can be difficult to win.
Find another lender: If one lender turns you down, another may be more flexible.

Condo Hotel Mortgage Rates in 2024

Interest rates for condo hotel mortgages are generally higher than for traditional mortgages because condotels are considered higher-risk investments. However, with non-QM Mortgage lenders offering more flexible terms, you can still find competitive rates if you meet certain criteria:

Interest rates for condo hotels in 2024 range from 6% to 9%, depending on your credit score, down payment, and property value.
Most condo hotel loans come as adjustable-rate mortgages (ARMs), such as 3/1, 5/1, or 7/1 ARMs. These loans offer a fixed interest rate for the first few years before adjusting to current market rates.

Working with a Mortgage Broker to Find the Best Condo Hotel Mortgage

Navigating condo hotel mortgages can be complicated, but you don’t have to go through it alone. A mortgage broker specializing in condo hotels can help you find the best loan options, compare rates, and guide you through the process. Here’s why working with a broker makes sense:

Access to multiple lenders: Brokers work with multiple non-QM lenders, giving you more choices.
Expertise in condotel financing: Not all lenders understand condo hotel loans, but brokers specializing in non-QM loans do.
Faster approval times: Brokers can help speed up the loan process, making closing on your condo hotel purchase or refinance easier.

How to Get Started with a Condo Hotel Mortgage in 2024

If you’re ready to move forward with purchasing or refinancing a condo hotel, here’s what you need to do:

Contact a non-QM mortgage broker: Find a broker specializing in condo hotel mortgages.
Gather your documents: Be prepared to provide financial statements, tax returns, and proof of any rental income.
Get pre-approved: Pre-approval will help you understand how much you can borrow and what down payment you’ll need.
Choose your property: Work with a realtor specializing in condo hotels to find the perfect unit for your needs.

Conclusion: The Time is Right for Condo Hotel Mortgages in 2024

Whether you’re looking to buy or refinance a condo hotel unit, 2024 will be a great year for condo hotel mortgages. With more flexible loan options, competitive rates, and a growing market, there’s never been a better time to invest in a condo hotel.

If you’re ready to take the next step, don’t wait. Contact Non-QM Mortgage Lenders today at 800-900-8569 and start exploring your options for condo hotel financing. You can also email us at gcho@gustancho.com. With the right mortgage, you can turn your dream of owning a condo hotel into a reality—and enjoy the benefits of both luxury living and rental income.

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FAQs: Condo Hotel Mortgages

1. What is a condo hotel mortgage? A condo hotel mortgage is a loan used to purchase or refinance a condo hotel unit. These are condos located in hotels, where you can stay part of the time and rent them out when you’re not using them.
2. Can I get a conventional loan for a condo hotel? Fannie Mae or Freddie Mac conventional loans are not suitable for financing condo hotel mortgages. You’ll need to go through a non-QM lender specializing in condo hotel mortgages.
3. What is a non-QM lender, and why do I need one for a condo hotel mortgage? A non-QM (non-qualified mortgage) lender offers loans that don’t meet traditional mortgage guidelines. They specialize in unique properties like condo hotels, making them the go-to option for financing these properties.
4. What are the down payment requirements for condo hotel mortgages? Most non-QM lenders require a down payment of at least 25-30% for condo hotel mortgages, depending on whether the property is a primary residence or investment property.
5. Are interest rates higher for condo hotel mortgages? Yes, interest rates for condo hotel mortgages are generally higher than traditional home loans because condotels are considered riskier investments. The interest rates usually vary between 6% and 9%, based on your financial situation.
6. Can I refinance my condo hotel mortgage? Yes, you can, especially if you’re looking to lower your interest rate or access equity. Non-QM lenders can help with refinancing even if your original loan was with a big bank.
7. What are the requirements to qualify for a condo hotel refinance? To refinance a condo hotel, you’ll typically need an LTV (loan-to-value ratio) of 75% or less for primary residences and 60% or less for investment properties, along with a good payment history.
8. How does the appraisal process work for condo hotel mortgages? Condo hotel appraisals can be challenging because there may be fewer comparable sales. Lenders will require a full appraisal with recent comparable sales from the same complex, and sometimes, two independent appraisals may be needed.
9. Why should I work with a mortgage broker for a condo hotel mortgage? A mortgage broker who specializes in condo hotel mortgages has access to multiple non-QM lenders and can find the best loan options for you. They also understand the specific requirements of condo hotel financing, making the process smoother.
10. What’s the loan-to-value (LTV) ratio requirement for condo hotel mortgages? For most condo hotel mortgages, the LTV is 75% for owner-occupied or second homes and 60% for investment properties. This means you’ll need at least 25% equity in the property for purchases and refinances.

This blog about Condo Hotel Mortgages was updated on September 3rd, 2024.