Mortgage guide
Hotel operators are assessed on trading performance and profitability. The guide covers affordability, non-trading properties and finance for refurbishment or development.
For hotel operators seeking a commercial mortgage for a hotel, trading performance is a primary underwriting factor. Most hotel mortgage lenders assess affordability using a loan-to-EBITDA ratio, meaning the hotel’s accounts must demonstrate sufficient profitability to service the proposed borrowing.
Operators with well-performing hotels may access more competitive hotel mortgage rates, higher loan amounts, and more flexible terms. Consistent EBITDA and stable trading reduce lender risk and expand available product options.
Where a hotel is non-trading or closed and profitability cannot yet be evidenced, lending options are more limited. In these cases, commercial mortgages for hotels are typically assessed against the property’s underlying value, with lenders offering up to 70% loan-to-value based on a 90-day bricks-and-mortar valuation.
Borrowers developing hotels may use short-term funding of up to 36 months, often without exit fees, to complete refurbishment works and stabilise trading before refinancing onto a long-term hotel commercial mortgage.
Whether refinancing, expanding, or acquiring a new site, hotel finance must reflect operational complexity. Specialist lenders assess hotels differently from standard commercial assets, requiring bespoke mortgage structures aligned with business performance and future plans.
Choose owner occupier for a business buying or refinancing premises it trades from, assessed on adjusted net profit before tax from the latest accounts, or investment for property let to tenants, assessed on lease income.
For context, these are the wider product terms covered by this guide. Availability and eligibility depend on your circumstances and the lender.
| Criteria | Detail |
|---|---|
| Max loan to value (LTV) | Up to 75% on the hotel cases we arrange, depending on trading, valuation basis and experience |
| Term | 15 to 40 years |
| Completions | Timescale depends on the valuation, the legal work and the lender; an adviser gives a likely timescale for the case |
| Repayment options | Capital repayment or interest only |
| Commercial mortgage rates | Priced case by case on trading, LTV and lender; current rates on request, subject to status and lender criteria |
| Rate options | Variable, base rate tracker, and 2, 3 or 5 year fixed mortgage options |
| Valuation methods | Going concern or investment (market value 1, MV1), MV2, MV3, or bricks and mortar on a 90 to 180 day basis |
| Flexible leases | Rolling leases, weak covenants and short unexpired terms considered by some lenders on investment hotels |
| Adverse credit | Accepted on some products, case by case |
| Locations | Available in England, Scotland, Wales and Northern Ireland |
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Yes. A hotel can be mortgaged in the UK with a commercial mortgage, to buy it, refinance it or raise capital against it. Lenders assess the trading performance, the valuation method, the type of property and whether the business is sustainable, and loan-to-value limits are usually lower than on standard residential mortgages.
Usually, yes. Hotels are higher-risk trading businesses, so lenders generally expect relevant hospitality or management experience. Exceptions are possible where strong management structures and proven trading performance are in place.
Usually. Lenders assess a hotel's affordability mainly on sustainable business income, so they normally ask for full trading accounts. For a closed or non-trading hotel, some specialist lenders may also consider personal income alongside a vacant possession valuation, at a lower loan-to-value.
Yes. A hotel chain acquisition in the UK can be financed with a portfolio commercial mortgage or an acquisition loan secured across the group's hotels. Lenders assess the portfolio's combined trading accounts, the management team's track record and the debt service cover. Banks, debt funds and private equity-backed lenders fund transactions of this scale.
A first-time buyer can find it harder, because a hotel is a complex trading business: lenders look for relevant operational or management experience, and without it there are fewer options. Experienced management or a strong trading record can help, and an adviser checks which lenders will consider the case.
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