Before you apply for a hotel refurbishment loan, it’s important that you understand what your options are.
Many hotel owners, property developers and landlords apply for what is known as property refurbishment finance, for a range of different renovation projects. Whether you’re looking to enhance your property offering, refurbish your hotel before renting or selling it, or simply update the interiors, hotel refurbishment can help attract new guests and help you grow your business.
Looking for a hotel refurbishment loan and wondering what your options are? We’ve created a helpful guide outlining everything that you need to know.
What are the loan options for hotel refurbishment?
There are a number of different hotel refurbishment loans that you should be aware of when looking for finance. The main loan options for hotel refurbishment are:
Bridging loan
You can use a bridging loan to access the finance you need whilst your re-mortgage application process is being completed. Known as a short-term loan that is quick and flexible, a bridging loan can be used for projects such as bathroom and kitchen replacements, redecoration, rewiring and electrical work, or plumbing and drainage work.
A bridging loan is one of the most popular types of property development finance and is widely used for ground-up or light refurbishments.
Refurbishment loan
Refurbishment finance, also known as a refurbishment mortgage, is a loan that is used for the sole purpose of renovating a property. This is a great option if you’re looking to upgrade your hotel quickly and easily.
This type of finance is suitable for both light refurbishment and heavy refurbishment projects. The funds are released in two different stages – the first payment is based on a percentage of the property price and the second is released once the refurbishment has been completed.
Keep in mind that the amount you can borrow is based on the projected value of the property once the renovations have been carried out.
What is a light refurbishment loan?
Light refurbishments usually refer to projects that total less than 15% of the total value of the property and include aesthetic refurbishments, such as:
- Painting
- Fitting a new kitchen
- Fitting a new bathroom
- Changing fixtures and fittings
- Changing interiors
- Replacing flooring
What is a heavy refurbishment loan?
Heavy refurbishments tend to cost more than 15% of the property’s value and involve a lot more work than light refurbishments. Many heavy refurbishment projects also require structural and require planning permission.
Examples of heavy refurbishment include:
- Major structural work
- Internal restructure
- Multiple unit refurbishments
- Exterior refurbishments
What are the refurbishment finance lending criteria?
Before applying for refurbishment finance, you should familiarise yourself with the relevant lending criteria, this typically includes the following:
- You must have equity in the property
- Mortgage repayments must be up-to-date
- The property cannot be the borrower’s primary residence
- A valuation must be completed before the application
- Costings, pricing and an exit strategy must be provided
If you’re considering buying a commercial property, it’s important to speak to someone experienced in the sector to ensure that you are aware of all the funding options available. Get in touch to speak to one of our skilled and experienced team. We are always on hand to answer any of your queries regarding commercial mortgages.
