Hotel Development Finance
Welcome to Mortgage Lane, your trusted partner in hotel development finance. Our award-winning team of brokers, backed by extensive property investment experience, is dedicated to providing tailored financial solutions for your hotel development needs. Catering to both seasoned landlords and first-time investors, including those facing unique credit challenges, we’re committed to offering expert guidance through every step of your hotel project. Rely on us to navigate the complexities of hotel finance with confidence and ease.
PROCESS BREAKDOWN
Information gathering and advice
The first process in your Hotel development finance application will be gathering or updating information in relation to the property, land, or yourself. Once this has been established your expert development finance broker will make a product recommendation.
Credit approval
Once you are satisfied with the product recommended and have confirmed to proceed, this will usually be submitted the same day to give you a decision, Once the lender has approved the deal, we can instruct the surveyor and quantity surveyor, or asset manager.
Underwrite, valuation and QS sign off
Once the application is submitted, your valuation will be booked in and most of the time (depending on the lender). This will usually completed once your initial underwriting has been completed. Once the valuation is returned as well as the Quantity Surveyors (QS) report, if acceptable, the lender would then look to make a formal offer. You can then move to legal stage.
Offer and completion
Once you have had your development finance offer, you will require adequate legal advice and then once you’re happy, your solicitor can draw this down once the legal requirements are satisfied. Your broker at Mortgage Lane will always be checking in on the application post offer, so we are chasing for you too!
Refurbishment Loan Eligibility Beyond
Hotel development finance presents a strategic avenue for funding your hospitality project, where lenders commonly offer up to 75% Loan to Gross Development Value (GDV). This financing typically encompasses 75% of the purchase price and 100% of the construction costs, with funds released in arrears. Suitable for a range of hotel developments, from minor refurbishments to major construction, these financial options accommodate developers of varying experience levels. Whether your project involves subtle upgrades or extensive redevelopment, hotel development finance is designed to match your project’s profitability and funding needs.
Experts in Hotel development finance
At Mortgage Lane, we specialise in hotel development finance, catering to both experienced property investors and those new to hotel projects. Our partnerships with competitive lenders facilitate prompt and efficient financial transactions, essential for adhering to the strict timelines often associated with hotel developments. Rely on us to adeptly handle the intricacies of your project with our sophisticated financial solutions.Specialist scenarios we cater to include:
- High-rise hotel developments
- Conversions from commercial to hotel use
- Partly constructed hotel schemes
- Modular hotel constructions
- Projects with restricted covenants or specific usage requirements
- Complex hotel build types
Complex hotel build types
At Mortgage Lane, we recognise the unique investment opportunities presented by guest houses, traditionally known as bed and breakfast establishments. Investors often seek to transform these properties into modern aparthotels, hotels, serviced accommodation units, or to simply elevate their standards. We cater to this dynamic sector by providing access to lenders who specialise in financing such conversion and improvement schemes.
Guest House Conversion and Improvement Finance Features
Specialised Lending for Diverse Projects: Whether you plan to convert a guest house into an aparthotel, a full-service hotel, or serviced accommodation units, or if you aim to upgrade its existing facilities, we have connections with lenders who specialise in these specific types of projects.
Tailored Financing Solutions: Understanding that each guest house conversion or improvement project has its unique financial needs, we offer customised financing solutions to align with your project’s objectives and scope
Legal Classification Expertise: In England and Wales, guest houses fall under the C1 classification, while in Scotland, they are classified as Class 7 assets. Our expertise in these legal classifications enables us to provide informed guidance and tailored financial solutions that comply with regional regulations.
Competitive Financial Terms: We offer competitive terms for guest house conversion and improvement loans, including favourable rates and flexible repayment options to suit your project timeline and budget.
Inclusive Approach: We welcome applications from a diverse range of clients, including those with unique credit histories, and assess each project on its individual merits to ensure fair and comprehensive financing solutions.
Our Approach at Mortgage Lane
At Mortgage Lane, our approach is client-centric and detail-oriented. We understand that converting or improving a guest house is not just a property investment but a step towards reshaping a hospitality experience. Our team works closely with you to understand the intricacies of your project, ensuring that our financial solutions are precisely tailored to meet your specific needs and goals.
Conclusion
If you are considering a project involving the conversion or improvement of a guest house, Mortgage Lane is here to offer our expertise and access to specialised lenders. Contact us to explore how we can assist in successfully financing your guest house project, leveraging our comprehensive understanding of the market and dedicated financial options.
At Mortgage Lane, we acknowledge the increasing demand for creative financing solutions in hotel development, particularly for conversion projects. Our proficiency in offering customised financing caters to developers focused on transforming existing structures into distinctive hotels.
Comprehensive Hotel Development Finance Features
Loan to Gross Development Value (LTGDV): For hotel conversion projects, we provide loans up to 75% of the LTGDV, ensuring substantial financial backing for your project.
Joint Venture and Equity Products: Our broad spectrum of financial offerings includes joint venture and equity options, providing developers with versatile financing methods for their hotel conversions.
Flexible Loan Terms: Our loan terms range from one month to five years, aligning with the diverse timelines and stages of hotel conversion projects.
Inclusive Financing: Recognising the complexities in financial planning, we welcome applications from clients with diverse credit backgrounds, evaluating each project on its individual merits.
Competitive Rates: With rates starting at 7% per annum, we offer cost-effective financing solutions for your hotel development.
2nd Charge Mezzanine Funding: To support developers in need of extra capital, we offer 2nd charge mezzanine funding, increasing your financial flexibility for the project.
Refurbishment Loans for Efficient Hotel Conversion
Refurbishment loans are often an ideal choice for hotel conversion projects, particularly those requiring detailed project management. These loans typically feature more economical fees and are managed by asset managers instead of quantity surveyors, providing a more efficient conversion process.
Our Approach at Mortgage Lane
Our team at Mortgage Lane is committed to understanding the unique requirements of your hotel conversion project. We believe in creating more than just buildings; we’re contributing to the development of remarkable hotel experiences. By collaborating closely with you, we ensure that our financial solutions are perfectly in sync with your project objectives, making a significant impact on the success of your hotel development.
Conclusion
If you’re embarking on a hotel conversion project, Mortgage Lane stands ready to assist you with bespoke hotel development finance solutions. Contact us to discover how we can support the successful financing of your conversion project, leveraging our expertise and extensive range of financial options.
At Mortgage Lane, we are experts in hotel development finance, particularly for ground-up development projects. Our proficiency lies in recognising the distinctive challenges and opportunities that come with constructing hotels from the ground up. We offer customised financial solutions to turn your hotel vision into reality.
Key Features of Our Hotel Development Finance
Loan to Gross Development Value (LTGDV): We typically offer loans up to 75% of the LTGDV. This financial structure is crafted to provide developers with significant leverage, facilitating the management of a considerable portion of the project costs.
Joint Venture and Equity Products: Recognising the uniqueness of each hotel project, we provide joint venture and equity products. These offer more adaptable financing options that are in sync with your project goals and financial circumstances.
Flexible Terms: Our loan terms vary from one month to five years, accommodating the diverse timelines associated with hotel development projects.
Adverse Credit Acceptance: We are committed to inclusivity, hence we accept applications even from those with adverse credit histories. Each project is assessed on its own merits to ensure equitable consideration.
Competitive Rates: Our interest rates start at 7% per annum, providing competitive financing solutions for your hotel development.
No Upfront Fees: We value transparency and affordability; thus, we do not impose upfront fees for our hotel development finance services.
2nd Charge Mezzanine Funding: For added financial leverage, we offer 2nd charge mezzanine funding options, a useful option for developers in need of additional capital beyond the primary financing.
Our Approach
At Mortgage Lane, our approach is client-centered. We understand that developing a hotel is not just about constructing a building; it’s about creating a destination. Our team collaborates closely with each client to fully grasp the specific needs and objectives of your project. Our goal is to offer not just financing, but solutions that contribute to the success of your hotel development.
Conclusion
Whether you are initiating a new hotel project from scratch or expanding your existing portfolio, our hotel development finance options at Mortgage Lane are crafted to support your aspirations. Contact us to explore how we can assist in realising your hotel project with our bespoke financial solutions.
TRY OUR HOTEL DEVELOPMENT LOAN CALCULATOR
About Hotel Development Finance
Local searches play a crucial role in land transactions, particularly for projects involving hotel development finance. They provide vital information on planning permissions, legal restrictions, and other local authority records pertinent to the land. This data is critical for evaluating the feasibility and identifying potential risks associated with hotel development projects and is often a key factor in obtaining development finance.
In the realm of hotel development finance, local searches can reveal information about zoning laws, existing or proposed local developments, environmental concerns, and access rights. This information is crucial for assessing the land’s suitability for hotel development and for strategic planning.
Technically, it is possible, but it is highly discouraged, especially in the context of hotel development finance. Foregoing local searches could lead to overlooking critical issues that might have significant financial and legal repercussions on your hotel development project and its financing.
Local searches for hotel development projects are typically initiated and conducted by your solicitor as part of the land purchasing process. This step is particularly crucial when seeking hotel development finance, as it forms a vital component of your funding application and project planning.
As the LTGDV ratio increases in hotel development finance, the interest payable balance also tends to rise. This is due to the interest being calculated on the larger loan amount, which grows in conjunction with the increase in the Gross Development Value (GDV) of the hotel development.
When the product fee and interest are added to the loan in hotel development finance, the initial loan amount is increased. Consequently, the borrower pays interest on a higher principal over the loan term, elevating the total cost of the loan.
Developers need to consider the total cost of the loan, including the capitalised interest, in their hotel development plans. It’s critical to assess the project’s viability with the augmented loan amount and ensure that the final LTGDV ratio is within sustainable limits.
At Mortgage Lane, we recognise that every journey begins with a first step. In the world of hotel development finance, while some competitive lenders might favour borrowers with prior development experience, particularly for more intricate projects, it’s crucial to know that there are many lenders who do not necessitate previous experience in hotel development. This applies even to projects involving extensive renovations or construction. Our role is to assist you in navigating this process and to connect you with a lender that suits your unique situation and the specific requirements of your hotel development project.
The terms for hotel development finance usually span from 1 to 60 months, offering the versatility needed to match a variety of project schedules. Recognising that these loans are a fundamental aspect of engaging in property development, many developers, motivated by the prospects of profit, strive to conclude these financial agreements as swiftly as possible.
In hotel development finance, lenders often establish a minimum term that ranges between 1 to 3 months. This stipulation means that once your hotel development project reaches completion, you have the opportunity to exit the finance agreement soon after, often immediately after the minimum term concludes. This feature of hotel development finance provides developers with a level of adaptability, enabling them to orchestrate their exit strategy in harmony with the timing of their project completion and fiscal goals.
In the context of social housing development finance, specialist lenders often employ a closed legal panel. This means they specify a list of solicitors who are authorised to represent them. When seeking finance, you would choose from this list for legal representation. Joint representation, where the selected solicitor’s firm represents both the lender and you, is sometimes an option. However, some lenders on a closed panel may only offer sole representation for themselves, in which case you can choose your own solicitor separately, provided they meet certain criteria. It’s important to note that in cases of sole representation, you will be responsible for paying two sets of legal fees – one for your solicitor and one for the lender’s.
We arrange cost-effective hotel development finance for:
- Individuals
- Special Purchase Vehicles/Limited Companies
- Limited Liability Partnerships (LLP)
- Trading companies
- Charities
- On/Offshore Trusts
It is important to note that hotel development loans are not covered by the Financial Services Compensation Scheme, so borrowers should ensure they are dealing with a reputable lender.
While not a legal requirement, local searches are typically demanded by lenders in the context of hotel development finance. These searches ensure that the land is suitable for hotel development and is not subject to any issues that could compromise the project or its financing.
Local searches are an integral part of the due diligence process for lenders in hotel development finance. They provide lenders with confidence that their investment is secure and that the land development is feasible. Negative findings in local searches can impact loan approvals, terms, or the viability of the hotel development project.
If local searches identify issues, it is important to assess their impact on your hotel development plans. Consult with your solicitor and lender to understand how these findings might affect your development finance and to consider potential solutions or alternatives.
In hotel development finance, most lenders tend to add the product fee and the interest for the loan term to the total loan amount. This results in the interest and product fee being capitalised, meaning they are included in the total loan balance instead of being paid periodically.
Yes, lenders in hotel development finance generally have a cautious approach towards the LTGDV ratio. Most will refrain from financing projects that necessitate an LTGDV ratio exceeding 75%. This limit helps manage risk and ensures that the loan amount is proportionate to the value of the completed hotel development.
Whether interest can be paid periodically in hotel development finance depends on the lender’s terms. Some lenders might offer this option, but it is generally less common, as the trend is to capitalise the interest into the loan.
To mitigate the impact of interest payments in hotel development finance, effective project planning for timely completion can be key, as this reduces the overall interest accrued. Additionally, developers can explore specific financing incentives or options tailored to hotel developments to secure more favourable terms.
In securing a hotel development loan through Mortgage Lane, possessing a regular income isn’t always a prerequisite. However, lenders will meticulously assess your exit strategy. If your plan includes refinancing the hotel upon its completion, they will scrutinise your income to ascertain its alignment with the criteria of prospective remortgage lenders. This evaluation acts as a ‘sense check’ to ensure that your income levels are suitable for the terms of available remortgage options. Should your exit strategy involve selling the property, the lender’s focus will shift to evaluating the expected Profit on Cost (POC) levels.
Similar to traditional mortgages, there are lenders in the hotel development finance sector who are open to considering applicants with adverse credit histories. If you have a history of missed payments, County Court Judgments (CCJs), defaults, or even an Individual Voluntary Arrangement (IVA), Mortgage Lane can help you find an appropriate lender for your hotel refurbishment or development loan. For those who have been discharged from bankruptcy, the range of available options generally improves after 3 years, and even more so after 6 years.
In the context of hotel development finance, it’s important to recognise that lenders often adopt a ‘non-status’ approach in their underwriting. This means they tend to focus more on the profitability potential of the hotel development project and the viability of the exit strategy, rather than exclusively on the applicant’s credit history. This approach can open doors for developers with adverse credit to secure the financing they need for their hotel development projects.
No, a minimum income is usually not a critical underwriting criterion for a hotel development loan. Given that these projects are often pre-sold or sold upon completion, lenders in the hotel development finance sector tend to focus less on the borrower’s personal income and more on the economic potential of the project. Crucial financial metrics such as the profit on cost, Loan to Gross Development Value (GDV), and Loan to Cost (LTC) are the primary factors lenders evaluate to determine the financial viability of the hotel development.
We assist our clients with hotel development finance in England, Wales, Scotland and Northen Ireland.