How commercial mortgages for hotels work in the UK

Summary: Commercial mortgages for hotels are specialist secured loans where lenders assess both the property and the hotel business (historical trading, RevPAR, occupancy and forecasts). Options include purchase mortgages, refinance, development funding, bridging and fit-out loans. Typical loan-to-value (LTV) ranges are lower than standard commercial property lending and underwriting focuses on debt service cover, management expertise and licences. For a quick match to lenders or brokers who understand hospitality, start a Free Eligibility Check: Get Quote Now.

What is a commercial mortgage for a hotel?

Commercial mortgages for hotels are secured loans where the lender takes a charge over the hotel property (freehold or long leasehold). Unlike simple commercial property lending, hotel mortgages combine a property valuation with assessment of the hotel’s trading performance — revenue per available room (RevPAR), occupancy, average daily rate (ADR) and gross operating profit (GOP) all matter. Lenders underwrite both the asset (security) and the operating business (cashflow to service debt).

Types of hotel mortgage and finance solutions

Hotel owners and investors typically use a mix of finance depending on their objective:

• Purchase mortgages — Long-term loans for acquisition by operators or investors (terms often 5–25 years).
• Refinance — Replace existing debt, release equity or change loan structure to fund improvements.
• Development & conversion finance — For converting buildings into hotels or major extensions; funds are usually drawn in stages against development milestones.
• Bridging loans / short-term finance — Fast funding to secure a purchase or bridge to longer-term finance; higher cost but quick decisions.
• Portfolio & cross-collateral facilities — For owners with multiple properties; lenders may offer portfolio facilities or cross-security arrangements.
• Fit‑out and refurbishment loans — Funding for refurbishments that can be included in the mortgage or provided as a separate facility.

Who lends to hotels?

Providers vary by deal size and complexity:

• High-street banks (selective on hotels).
• Challenger banks and regional commercial mortgage lenders.
• Specialist hospitality lenders, debt funds and private equity lenders.
• Broking panels — experienced brokers can access niche lenders that aren’t on the high-street panel.

To see typical lender options for hospitality and related sectors visit our industry resource on hotels business loans.

How lenders underwrite hotel mortgages — what they look for

Underwriting is a mix of property and business appraisal. Key elements include:

• Property valuation: location, room count, condition, usable space, planning status, and lease terms (if leasehold).
• Trading performance: historic accounts, occupancy, RevPAR, ADR and GOP margin — lenders want evidence cashflow can service debt.
• Forecasts & business plan: realistic forecasts and sensitivity analysis (seasonality and downside scenarios are crucial).
• Loan-to-value (LTV): typically 50–70% for established hotels; development and higher-risk assets often attract lower LTVs.
• Debt service metrics: DSCR (debt service coverage ratio) tests whether operating income covers interest and principal.
• Management & operator strength: experienced operators, proven management agreements or franchise arrangements increase acceptability.
• Regulatory & safety compliance: fire, safety, food/hotel licensing and planning permissions must be in place or addressed in the plan.
• Security & guarantees: company charges, director or shareholder guarantees and cross-collateral may be required depending on risk.

Typical terms, rates & costs

Terms and costs vary widely by lender, asset and borrower profile. Typical elements to budget for:

• Loan term: purchase/refinance 5–25 years; development or bridging usually shorter (months to a few years).
• Interest basis: fixed-period, variable or discounted variable rates determined by lender and market conditions.
• Repayment options: capital & interest, interest-only periods, or staged repayments for development facilities.
• Fees: lender arrangement/booking fee, valuation and survey fees, solicitor fees (lender & borrower), broker fees (if used) and Stamp Duty Land Tax (SDLT) on purchases.
• Other costs: refurbishment retention accounts, building and specialist surveys, and contingency for unexpected works.

Eligibility checklist — do you qualify?

Common lender expectations:

• Clear business plan and reliable trading records (for operating hotels, 2+ years trading preferred).
• Management experience or a credible operator/management agreement.
• Up-to-date audited accounts, recent management accounts and realistic forecasts.
• Property freehold or long leasehold with satisfactory lease covenants.
• Acceptable LTV and independent market valuation supporting the loan request.
• Compliance with local planning, licensing and safety regulations.
• Minimum facility sizes typically start from around £10,000 and up; UK Business Loans generally arranges finance from £10,000 upwards.

Step-by-step application process

1) Initial enquiry & eligibility check

Provide basic details (loan amount, property type and location, trading history). Use our quick enquiry for a Free Eligibility Check: Get Quote Now. This is an information request only — not a loan application.

2) Match to lenders/brokers

We introduce you to specialist brokers and lenders who understand hospitality and present suitable options without multiple separate submissions that could harm credit profiles.

3) Detailed appraisal

A chosen lender or broker will request full accounts, forecasts, tenancy or lease documents, licenses and a property valuation/survey.

4) Offer & legal work

Following underwriting, a formal offer is issued. Solicitors conduct searches, check covenants and complete the security documentation.

5) Drawdown & post-funding reporting

Funds are released. For development or refurbishment projects, drawdowns are staged against completion certificates. Ongoing covenant reporting may be required.

How to improve your chances of approval

• Prepare clear management accounts and three-way cashflow forecasts (including downside scenarios).
• Address any regulatory or licensing shortfalls before approach.
• Simplify company structure and reduce other secured borrowings where possible.
• Secure longer lease terms or consider buying the freehold if practicable.
• Use an experienced hotel finance broker — they know which lenders will accept your risk profile and can speed up approval.

Timescales & common delays

• Bridging: days to a few weeks (fast decisions; higher cost).
• Purchase/refinance: typically 6–12 weeks from instruction to completion for straightforward cases.
• Development finance: longer — time is needed for cashflow modelling, planning, staged valuations and milestone approvals.

Frequent delay points include valuation/survey scheduling, unresolved planning/licensing matters and legal searches (especially for older buildings or complex lease terms).

Frequently asked questions

Can a start-up operator get a hotel mortgage?

Possible, but options are narrower. Lenders prefer experienced operators, stronger security and lower LTVs for start-ups. Specialist lenders and funds sometimes consider start-ups with strong business plans and experienced management in place.

Are personal guarantees usually required?

Often yes, particularly for smaller owner-operated hotels. Guarantee requirements vary by lender and loan size.

Can a mortgage include refurbishment costs?

Yes — many lenders offer staged release facilities for refurbishment or separate fit-out loans, subject to valuation and milestone conditions.

What is RevPAR and why is it important?

RevPAR (Revenue per Available Room) = occupancy × average daily rate. It’s a core metric lenders use to judge a hotel’s revenue potential and hence its ability to service debt.

How UK Business Loans helps

UK Business Loans does not lend. We connect hotel owners and investors with specialist lenders and brokers who understand hospitality finance. Submitting an enquiry through our short form is quick, free and non‑binding — it’s information that helps us match you to the most appropriate partner. An initial enquiry is not a loan application and does not affect your credit score. To start the process, complete a Free Eligibility Check: Free Eligibility Check or Get Quote Now.

Why use an introducer like us? We save time, reduce multiple direct applications to lenders, and match you with organisations that have hospitality experience — increasing the likelihood of a competitive, accepted offer.

Important: UK Business Loans is an introducer and not a lender or financial adviser. Exact loan terms, rates and availability depend on your circumstances and the lender chosen. Facilities typically start from £10,000 and above.

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Further reading & next steps

If you want tailored options for a hotel purchase, refinance or refurbishment, the fastest route is to complete our short enquiry and we’ll match you to suitable lenders or brokers who specialise in hotels: Get Started — Free Eligibility Check.

Need specialist help preparing forecasts or a lender-ready pack? Tell us in the enquiry and we’ll connect you to brokers who can assist with valuation-ready documentation and introductions to lenders familiar with the hospitality sector.

1. What is a commercial mortgage for a hotel and how does it work?
A commercial mortgage for a hotel is a secured loan against the hotel property where lenders underwrite both the asset value and the hotel’s trading performance (RevPAR, occupancy, ADR and GOP) to ensure cashflow can service the debt.

2. What types of finance are available for hotels (purchase, refinance, development, bridging)?
Hotel owners can access purchase mortgages, refinance, development/conversion finance, bridging loans, portfolio facilities and fit‑out/refurbishment loans depending on the project and timescale.

3. How much can I borrow for a hotel (typical LTV and loan sizes)?
Typical loan-to-value (LTV) for established hotels is usually between 50–70% with facility sizes generally starting from around £10,000 and rising into multi‑million-pound loans for larger assets or portfolios.

4. How long does it take to arrange a hotel mortgage or short-term bridging loan?
Bridging finance can complete in days to a few weeks, while standard purchase or refinance hotel mortgages typically take 6–12 weeks and complex development cases can take longer.

5. What do lenders look for when underwriting a hotel mortgage?
Lenders assess property valuation, historic trading and forecasts (RevPAR, occupancy, ADR, GOP), DSCR, operator/management strength, licences/planning compliance and appropriate security/guarantees.

6. Will submitting an enquiry through UK Business Loans affect my credit score?
No — submitting a Free Eligibility Check or initial enquiry through UK Business Loans is not a loan application and does not affect your credit score, though lenders may carry out checks later if you proceed.

7. Can start-up hotel operators get finance and what are the options?
Start-up operators can access finance but options are narrower, often requiring stronger security, lower LTVs, experienced management or specialist lenders willing to consider well-prepared business plans.

8. Are personal guarantees usually required for hotel mortgages?
Personal or director guarantees are often required, particularly for smaller owner‑operated hotels, although guarantee requirements vary by lender, loan size and security offered.

9. Can refurbishment or fit‑out costs be included in a hotel mortgage?
Yes — many lenders provide staged release facilities or separate fit‑out/refurbishment loans subject to valuation, milestone certificates and lender conditions.

10. How does UK Business Loans help me secure hotel finance?
UK Business Loans connects you quickly and free to vetted brokers and lenders who specialise in hotels, matches you to suitable partners, and handles introductions so you avoid multiple direct applications and speed up the process.