Written by Lee Trett Reviewed by Chris Duckworth
27 February 2025
Added lenders section and FAQs about getting a hotel mortgage with no deposit and buying a hotel room. Added calculator
19 December 2024
Revised rates section and removed outdated information
19 July 2024
First Published
19 July 2024
Rewrote entire article in line with latest market conditions and lending criteria
If you’re looking to invest in a hotel, guest house or B&B, you might be wondering how you go about obtaining the right type of finance.
Read on to find out what type of mortgage you need to buy a property to operate in the hospitality industry, and how Money Helpdesk can help you find the right one.
Can you use a mortgage to buy a hotel or guest house?
Yes you can use a commercial mortgage to buy a hotel. For a guest house or bed and breakfast style property, you’ll usually need a semi-commercial mortgage if you also plan to live in it.
Commercial mortgages aren’t regulated by the FCA (Financial Conduct Authority), but semi-commercial mortgages typically are when 40% of the floorspace or more of the property is for residential use. This may apply to some guest houses, so it’s important to be clear on the percentage split of a mixed-use property.
Hotel ownership can be a lucrative business endeavour, but there are a range of considerations to be made before you purchase your first property. Keep in mind that most lenders will prefer that you have some experience in the hospitality industry before you take out a hotel mortgage.
How do these mortgages work?
As with any commercial mortgage application, lenders will expect you to put together a robust business plan to support your hotel or guest house mortgage application. This will need to demonstrate your industry experience to date and future profit projections for the new property.
Here are some of the main criteria that commercial lenders will be looking for you to meet when you apply for a mortgage for a hotel or similar property:
Lending criteria
- Deposit - Commercial mortgages tend to have a maximum LTV of around 75% although you may find 60-70% is more realistic when it comes to financing a hotel. This means you’ll need a deposit of around 30-40%, although it’s usually possible to borrow more if you secure your lending on a high value asset
- Financial history - Lenders will want to look at both your personal finances and credit history, and those of your business, especially if you’re already a hotelier or operate a similar hospitality-based company
- Experience - There are a number of accreditations required to run a hospitality business in the UK, so most lenders will be more comfortable if you already own or have managed hotels. If you plan to hire a manager to run the establishment for you, lenders will likely want to see their credentials in the industry too
- Legal compliance - You’ll need a number of legal certifications in place, such as licences, permits
- Property specific criteria - Lenders will look at the location and state of repair of the property, as well as demand for the type and class of hotel locally. Those is high footfall areas, such as cities, are likely to be considered lower risk than rural property that relies solely on marketing
- Occupancy - The potential occupancy rates will be reviewed carefully, including the GOPPAR (Gross Operating Profit Per Available Room) and ADR (Average Daily Rate)
How to get a commercial mortgage for a hotel purchase
Mortgages for hotels and guest houses can be difficult to arrange, as there are a wide range of factors for lenders to consider. This means that speaking to a broker with experience of arranging both commercial and semi-commercial mortgages in the hospitality industry is a good move.
As Money Helpdesk, we can help you to maximise your chance of a successful application and ensure that you find the most suitable commercial mortgage for your business at the best rate available.
You can book a free, no-obligation chat with a hotel mortgage specialist below:
Connect with a hotel mortgage expert today
How much can you borrow?
Commercial borrowing is bespoke to the individual application, so it’s difficult to predict how much you could borrow without knowing the specifics of your business and the hotel or guest house you plan to purchase.
You can typically borrow up to 70% LTV (so of the full value) of the property, so if, for example, you purchased a guest house that was £250,000, at 70% LTV you could borrow £187,500 and would need a deposit of £62,500.
To assess your affordability for a commercial mortgage for this purpose, the lender will review the protected operating profit of the hotel business to ensure it is sustainable.
Hotel mortgage calculator
You can use our calculator below to get an ideal of how much your hotel mortgage will cost each month and overall.
To reflect a typical commercial mortgage, we have set this tool to calculate results for an interest-only loan with a rate of 6% over 25 years, but these values can be changed manually.
What rates should you expect?
Commercial lenders don’t quote mortgage interest rates given that each application is reviewed on its own merit. Rates on hotel mortgages are higher than they are for residential mortgages, but exactly how much higher yours will be will depend on the LTV, the strength of the investment and your experience in the hospitality section.
Speak to a broker to find out what kind of rate you are likely to qualify for.
Which mortgage lenders are available?
Mortgages for hotels, guest houses and B&Bs tend to be offered by a mixture of different lender types, from the commercial arms of high street banks to specialist mortgage providers. Available lenders include:
- NatWest: Offers hotel mortgages through its commercial division with flexible repayment options and terms of up to 25 years.
- Cumberland Building Society: Provides mortgages for guest houses, B&Bs and hotels throughout mainland UK.
- OakNorth Bank: Specialises in large loans for hotel purchases, with mortgages starting at £1 million.
- HSBC: Offers commercial mortgages for hotels under its business banking range, with LTVs of up to 75%.
The above is just a snapshot of the lenders available. Speaking to a commercial mortgage broker before approaching any lenders is recommended as this will help you access the entire market, as well as professional advice.
Things to consider
There are a number of things to consider that will both help you to obtain suitable finance, and improve your chances of operating a successful hospitality business. These include, but are not limited to:
- Profitability - RevPAR (revenue per available room) is the metric used to evaluate the ability to fill all available rooms in a hotel at an average rate. It’s therefore important to consider this when drawing up your business plan and deciding on the ideal hotel or guest house for you. UK RevPAR is currently strong, particularly in London, and is expected to grow during 2025.
- Licensing - It’s important to have all of the licences that you may need to operate a hotel or guest house before you apply for a mortgage, as lenders will want to see evidence that you can operate legally. This may include licences to serve food and alcohol, parking permits and more specific documentation, dependent on your intended facilities.
- Experience - If you’re new to the hospitality industry, it’s best to employ a manager with substantial experience in the day to day operation of a hotel or guest house to help you draw up your business plan. Lenders will also look more favourably on your application if you have employed an experienced hotelier.
- Hotel reputation - hotels with a less than favourable review history may well be cheaper, but many lenders will shy away from a hotel with a bad reputation, as this can be difficult to shift, even with a change of ownership. If you plan to purchase this type of property, it’s important to explain any improvements you plan to make to address previous issues.
Why choose Money Helpdesk for your hotel mortgage?
At Money Helpdesk, we have specialist commercial investment advisers with experience in arranging both commercial and semi-commercial mortgages for the hospitality industry.
Here are just some of the reasons hotel mortgage applicants choose us:
- We have access to over 20,000 mortgage deals across the market, including exclusive rates
- Our initial consultation is always free and there’s never any obligation
- We’re rated 5-stars on Google, Trustpilot and other leading review sites
- Our brokers specialise in hotel mortgages and arrange them every day
Ready to book in a free, no-obligation chat with a broker who specialises in hotel mortgages to find out more about your options? Get started here.
FAQs
You can get a commercial mortgage to buy a hotel or guest house in Scotland. Keep in mind, however, that there are different laws surrounding EPC certification on commercial property. This means that property you plan to buy will need to be EPC compliant in order to secure a mortgage.
There may also be some differences in the licensing requirements, especially when it comes to B&B or guest house property. It’s important to speak to a commercial broker with experience in all areas of the UK if you plan to buy in a devolved nation.
Securing a hotel mortgage with bad credit is undoubtedly more challenging. However, not all bad credit is created equally, and lenders will be concerned with the age and severity of the credit issue.
You may find that with a specialist lender and higher interest rate that you are still able to secure a hotel mortgage with bad credit history; our advisors can help.
Staying up to date with the latest trends and technology as a hotel business can be costly, with experts recommending refurbishment activity every 3-6 years. There are several financing options available to cover the cost of refurbishment, for example, secured or unsecured business loans, bridging finance or even a remortgage to release equity.
Our expert advisors can help you to understand the best sort of financing, depending on your needs.
Bridging loans are a type of flexible, short term finance that can be arranged very quickly.
If you're buying a hotel development at auction, for example, bridging loans can be beneficial to ensure you have the funds within the short timeframe required. Unlike with a mortgage, you can also get a bridging loan to buy an uninhabitable property, which could be a hotel that needs refurbishment to bring it up to standard.
As you may expect with a short term finance option, the rates tend to be higher, and you will need a clear exit strategy for when the term finishes; usually a commercial mortgage.
If you're looking to finance a hotel development project, either a build or refurbishment, development finance could be a viable option to consider.
With development finance, the funding is released in phases to align with the project, and you will only pay interest on the amount deposited so far. As with bridging finance, development finance is a short term option, and you will need to consider the future financing of the project once it is complete; which is likely to be a mortgage.
Yes. It is possible to get a commercial mortgage to buy a hotel with no deposit in the traditional sense, but this is only usually an option if you own a property or assets with enough equity in them to serve as the deposit. The lender would place a charge on the security property/asset, which means it would be at risk of being repossessed if you were to default on your mortgage.
As commercial mortgages are arranged on a bespoke basis, lenders have the flexibility to arrange deals like this for hotel purchases, but speaking to a broker before you enter one is highly recommended so they can advise you about the potential pitfalls and how to avoid them.
Yes. It is actually possible to buy a hotel room for investment purposes and earn a cut of the income it generates from guests, but these arrangements are usually strictly limited to cashbuyers.