Condo Hotel Unit Financing

What Is Condo Hotel Unit Financing?

Condo Hotel Unit Financing Are Non-Conforming Portfolio Loans

A condotel unit is a condominium unit inside a hotel that is privately owned by an individual and/or entity

  • Condotel Units, also known as Condo Hotel, have been very popular from the mid 1990’s until the 2008 when the real estate and financial markets crashed.  
  • A condotel unit owner can enjoy the condotel unit as a second or vacation home one or two months out of the year and can rent out the condotel unit the remaining time of the year he or she does not use it.  
  • The Condo Hotel management staff rents out the condotel unit if you are a member of the Condo Hotel Rental Program for condotel unit owners. 
  • The great part about being a condotel unit owner is that the Condo Hotel management staff can take care of your condotel unit and rent out your condotel unit not for a monthly fee but for a percentage on the rental income your unit receives. 
  • For example, if your condotel rents for $200 per night, the Condo Hotel management will collect the $200 and take a percentage of the $200. 
  • The amount they take depends on the Condo Hotel complex but normally the Condo Hotel complex takes anywhere between 30% to 50%. 
  • If the condotel unit does not rent, you are not liable to pay anything.

What Are Non-Warrantable Condos?

A non-warrantable condominium is a condominium building that does not conform to Fannie Mae and/or Freddie Mac condominium mortgage guidelines and cannot be finance through a conventional loan program. 

  • The main reason why a condominium is classified as a non-warrantable condominium unit is because 51% or more of the condo units are not owner occupied. 
  • In order for a condominium unit to be classified as a warrantable condominium is it needs to have 51% of the condominium owners live in the condominium as owner occupant. 
  • Non-warrantable condos are 51% or more investor owned and are rental condominium units.

Condo Hotel Unit Financing And Non-Warrantable Condo Loans

Condotel Mortgage Loans And Non-Warrantable Mortgage Loans came to an abrupt halt after the 2008 real estate and credit meltdown and most Condo Hotel unit owners have given up in looking for a portfolio mortgage lender who can do condotel and non-warrantable condominium mortgage loan.

If you want to purchase a condotel unit or a non-warrantable condominium or are interested in refinancing your condotel or non-warrantable condominium unit, whether it is for a better rate or to do a cash-out refinance, the good news is that condo hotel unit financing and non-warrantable condo financing is becoming more readily available.

Lending Guidelines On Non-Warrantable And Condo Hotel Unit Financing

Here are the general Condo Hotel Unit Financing And Non-Warrantable Condominium Unit Lending Requirements, however, every portfolio mortgage lender may have their own set of lending requirements:

  • Portfolio lender that offers 3/1 ARM, 5/1 ARM, 7/1 ARM amortized over 30 years.
  • Portfolio mortgage lenders generally do not offer 30 year fixed rate mortgage loans. ARM are Adjustable Rate Mortgages are 30 year loan programs, however, there is a fixed rate period and after the fixed rate period expires, the interest rate will adjust every year for the remainder of the 30 year loan term.
  • The new adjusted mortgage interest rate will be set by adding the margin plus the index.
  • The margin is fixed but the index can change depending on where the index is at the time the mortgage interest rate is due to adjust.
  • There are various indexes and it depends on the lender on which index they will decide on. COFI, LIBOR, and CMT are some common indexes that lenders choose from.
  •  Most condotel mortgage lenders require that Condotel and/or non-warrantable condominium units needs a kitchen and at least one bedroom and be at least 500 square feet.
  • Most condotel lenders require 75% loan to value.on primary home and second home condotel units. This includes Condotel refinance mortgage loans as well as cash-out refinance mortgage loans.
  •  Most portfolio lenders will require the following: Non-warrantable condominium requires a 80% loan to value on both purchase and refinance mortgage loans.
  •  Most condotel mortgage lenders require minimum credit score of 680 FICO but prefer borrowers to have 700 FICO credit scores or higher.
  • Condo Hotel Complex and/or Non-Warrantable Condominium Complex needs to be in good standing both financially and structurally.
  •  Loan sizes by most portfolio lenders range from $100,000 to $3,000,000 plus.
  •  Since condotel loans and non-warrantable condo loans are portfolio loans and do not need have to meet Fannie Mae or Freddie Mac Guidelines, the lending standards are set by the portfolio lender and the portfolio lender is the institution that sets the rules.
  • Most portfolio lenders require one year reserves for both the primary residence as well as the condotel unit and/or non-warrantable condominium unit.
  • Again, this requirement is up to the individual portfolio mortgage lender.
  • Debt to income ratios cannot exceed 43% which includes proposed Condotel or Non-Warrantable Condo Purchase as well as refinance mortgage loans.
  • Reserves are required but do not have to be cash reserves. 
  • Retirement accounts, investment accounts, and other liquid accounts can be used as reserves.
  • Typical reserves required are one year P.I.T.I. (Principal, Interest, Taxes, Insurance) per each property the borrower owns.
  • For example, if the borrower has a main residence and his P.I.T.I. is $1,000 per month and his proposed P.I.T.I. on his proposed condotel and/or non-warrantable condominium purchase is $1,000 per month, then the portfolio lender will require $24,000 in reserves.

Gustan Cho NMLS 873283

The Gustan Cho Team at Nationwide Mortgage & Realty LLC NMLS 272777

Toll Free: 800-900-8569


Cell:     1-262-716-8151