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Commercial mortgage for landlords purchasing first hotel

Commercial mortgage for landlords purchasing first hotel

06.03.18 | Written by: Andy Elley

The clients: A married couple with a large portfolio of rental properties located in London. The husband is self-employed consultant, the wife is a doctor.

Looking for a change in lifestyle the couple had set their sights on a hotel in Devon, which they planned to move into and run as a business. The wife was going to leave her job as a doctor and focus solely on the hotel business. The husband was to continue with his consultancy business and take on some of the administration tasks of the hotel to support his wife.

The property: The hotel, valued at £850,000, is a short stroll from Torquay’s main beach. It has 12 en-suite bedrooms, a private bar, swimming pool and hot tub.

The finance: The couple were planning to sell their home, which would give them a generous deposit of £350,000. The main challenge with this deal was that neither applicant had any experience in the leisure sector – the majority of lenders would decline an application on this basis.

The application process: We approached the business development manager of a high street bank to discuss the case.
Although, this particular lender usually requires experience, the business manager believed that the underwriters would take a more pragmatic approach because of the couple’s high-net worth status and large portfolio of rental properties. (If necessary they could hire in experienced management staff to support them).

We worked with the couple to collate the following documentation to support the application.


- A business plan for the hotel with projected turnover and profit targets
- 2 years’ business accounts from the husband’s consultancy business
- 3 months’ worth of bank statements
- Proof of identity

Within a few days the lender’s surveyor got to work and produced a comprehensive valuation report of the hotel.

The couple were delighted to receive an offer, just one month after submitting the application. Three months after, the funds were released. The couple are now enjoying their new life as hoteliers.

Property value: £850,000

Loan amount: £500,000

LTV: 59%

Rate:
3% term tracker (Bank Rate + 2.5%) 


Term:
15 years capital & interest


Mortgage payment:
£3,452pcm


Lender arrangement fee:
1.5% of the loan amount (£7,500)


Consultant:
Andy Elley, 01732 471644

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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