Trading as a B&B on a residential mortgage can leave you open to the risk that your loan will be called in by the bank. Whilst this often happens towards the end of a loan period, it can happen at any point.
Suddenly, you find yourself with 3 options:
- Find a lot of money to pay back the full amount on your mortgage.
- Find a new mortgage, pronto.
- Sell your home and business, quickly.
Option 1 is a pretty difficult thing to do. Option 3 can also be undesirable as, if the market isn’t right, you could end up losing out big time on your capital, and struggle to afford a new place to live.
Option 2 is your best bet, but even this isn’t without its problems.
The challenges of finding a new hospitality mortgage
If your mortgage has been called in, you may want to look for a new hospitality loan or mortgage. The trouble is, unlike residential mortgages, a hospitality mortgage is usually based on your revenue, not on your capital. This can leave you out in the cold if you only let rooms intermittently or only trade to suit your lifestyle
The other challenge comes with the fact that many B&B businesses are owned by couples later in their working life, as a way to combine income with lifestyle. Or, if your mortgage is 20 years into a 25 year term, it’s likely that you’ll be approaching the age of retirement. This poses another problem. Financial institutions can be reluctant to grant a long-term loan to B&B owners in their 60s, instead offering shorter terms.
This typically leaves a shortfall between the capital raised and the value needed to avoid selling your home.
How professional help can enable you to secure the loan you need
There are ways to overcome these challenges and increase your chances of securing a hospitality loan, without having to compromise.
At Stewart Hindley, we help hundreds of B&B owners find hospitality loans for their business every year.
We work with a network of lenders to lend to B&B owners and hotel proprietors, and we know what they are looking for, so we can use this experience to help B&B owners like you. We’ll work with you to put the structures and plans in place that maximise your chance of securing the loans you need to continue your dream, without losing your home and business.