Cash Out Condotel Refinance Loan, Rate & Term, & Purchase
It is very common for a lender to think they can finance a condotel unit and deny the loan. People often end up paying cash to purchase a condotel unit with hope they can do a cash out condotel refinance loan after closing.
Condotel Refinance Loan Programs
The loan-to-value depends on:
- Appraised value.
- Loan amount.
- Purpose – purchase, condotel cash out refinance, or rate and term.
- Occupancy type – primary, investment, or second home.
- Credit score.
- If you own your primary residence, rent, or live rent free.
- Income type – traditional income, debt-service coverage ratio, and no ratio.
The maximum loan-to-value for a condotel unit is currently 80%, although guidelines are always changing. It is important to work with a lender that fully understands what a condotel unit is and can finance them – this will save time and money.
Some Lenders Do Not Finance Condotel Units
Lenders can be broken down into specific groups:
- Traditional lender – only finances traditional loans and do not have any non-qualified mortgage programs.
- Non-qualified mortgage lenders – they have non-qualified mortgage programs and can even offer traditional loans.
- Hard money lenders – like non-qualified mortgage lenders that are typically issued by private investors or companies. They come up with their own guidelines and programs.
Loan Originators that work for traditional lenders often put an application together with the subject property being a condotel unit without fully understanding what a condotel unit is. These terms seem appealing to condotel investors but find out the hard way going through the process with the result being a denial. Traditional lenders are unwilling to finance these types of properties because they feel that they can be too risky of a collateral type securing the loan for them.
Condotel Refinance Loan Guidelines
Wholesale portfolio lenders finance condominium units that operate like a hotel. They can be individually owned, close in a limited liability company (LLC) or corporation. Though terms will vary, all the following are acceptable depending on the condotel loan program:
- Considered a primary residence.
- A vacation spot for the owner.
- Rented through vacation rental listing companies like Airbnb.
- Some allow short term and long-term rentals depending on the association.
- And can even be turned over to the hotel’s management for rentals.
Depending on the occupancy type:
- Traditional income can be used for qualifying purposes for all occupancy types.
- The debt-service coverage ratio can be used instead of personal income for investment properties.
- And even no ratio for investment properties.
Terms will vary based on your scenario for a purchase, a rate and term refinance, and condotel cash out refinance.