Updated 2016 Condotel Financing Requirements

2016 Condotel Financing Requirements

2016 Condotel Financing Requirements have gotten much easier for the 2016 calendar year due to the many inquiries and demand of these types of loans. A condotel unit is a condominium unit within a hotel or a condominium complex that has a rental desk and rents the condotel units when the condotel unit owner does not occupy it. The condotel unit is managed by the hotel homeowners association or condotel complex homeowners association. In lieu of managing and renting the condotel unit, the condotel homeowners association takes a percentage of the rental revenues. The percentage, or commission, the condotel homeowners association takes depends on what they charge. Normally a 40% to 50% split is not uncommon. Condotel unit owners do not have to use the condotel homeowners association to rent out their condotel units. They can rent them out themselves and keep all of the gross revenues from their rental.

2016 Condotel Financing Requirements: Down Payment And Credit Requirements

Down payment requirements differs for condotel units and non-warrantable condominium units. A condotel is a non-warrantable condominium as well, however, the difference between the two is that a condotel has a rental desk and is inside a hotel complex and/or a condo complex with a rental desk where daily and weekly rentals are allowed. A non-warrantable condominium complex can be no different than any other condominium complex without a rental desk but more than 51% of the condominium owners are investors. To be considered a warrantable condominium complex, 51% or more of the condominium unit owners need to be owner occupants. Warrantable condominium financing can be done with Fannie Mae and Freddie Mac conforming loans whereas only portfolio mortgage lenders can do non-warrantable condominium financing. All condotel and non-warrantable condominium mortgage loans are 30 year adjustable rate mortgages portfolio loans , which are available as 3/1 ARM, 5/1 ARM, and 7/1 ARM.

For owner occupant or second home condotel financing, 25% down payment is required for condotel financing. The difference between owner occupant and/or second home financing or investment home financing are as follows:

  1. If the condotel unit buyer is buying the condotel unit and has one other primary residence and the proposed condotel unit purchase is their second property, then the condotel unit buyer can qualify for a second home and/or vacation home condotel financing. If the condotel unit buyer has no other property and the condotel purchase is their first property, then it can be classified as their primary property. Primary and second home condotel financing requires 25% down payment.
  2. If the condotel unit buyer has more than 2 or more properties and the condotel unit purchase will be their third property, then the condotel financing will fall into investment home financing category. With investment condotel financing, 40% down payment is required and mortgage interest rates will be higher than primary home and/or second home condotel financing.

The condotel unit needs to be at least 500 square feet, have at least one bedroom, and cannot be under any major litigation or in any stage of a bankruptcy. The condotel project needs to have sufficient reserves and in great condition. Minimum loan size is $100,000 and there is no maximum loan size. Condotel refinance mortgage loans require a maximum of 75% loan to value, whether it is rate and term refinancing or cash out refinance mortgage loans.

Down Payment Requirements on non-warrantable condominium financing is 20% down payment. If you are interested in condotel and/or non-warrantable condominium financing, please call me at 262-716-8151 or email us your questions at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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