A **hotel mortgage** is a specialist commercial mortgage used to buy, refinance or refurbish a trading hotel, with rates typically 7.00% to 10.00% and LTVs of 60-70%. Lenders underwrite the trading **hospitality business** as much as the bricks and mortar, so accounts, RevPAR and operator experience matter as much as the property valuation.
What Is a Hotel Mortgage?
A hotel mortgage is a form of [commercial mortgage](/services/commercial-mortgages) secured against a trading hotel asset, used for a **hotel purchase**, refinance or capital release. Unlike a **residential mortgage**, where lenders focus on borrower income, hotel mortgage lenders underwrite both the property and the **hotel business** behind it.
This is the core point to grasp: a mortgage for a hotel is a hybrid product. It sits between a standard **commercial property** loan and a **business loan**. The lender wants to see a sustainable trading business, a quality asset, an experienced operator and a sensible loan structure. **Commercial hotel mortgages** that combine sensible LTV with strong **business finance** fundamentals are achievable across the UK market.
Hotel Mortgage Rates 2026
Hotel mortgage rates currently sit between 7.00% and 10.00%, above standard commercial **mortgage rates** because lenders price in trading-business risk on top of property risk. With the Bank of England base rate at 4.50%, most hotel pricing equates to base plus 2.50% to 5.50%.
Well-established branded properties with strong covenants achieve the lower end. Independent boutiques, B&Bs and turnaround situations sit at the upper end. The table below shows indicative pricing by **type of hotel**.
| Hotel sub-type | Indicative rate | Max LTV | Typical lender |
|---|---|---|---|
| Branded budget (Premier Inn, Travelodge franchise) | 7.00%-8.00% | 65-70% | High street + challenger |
| Mid-market branded (IHG, Marriott, Hilton franchise) | 7.00%-8.25% | 65-70% | High street + challenger |
| Independent mid-market hotel | 7.50%-9.00% | 60-65% | Challenger + specialist commercial |
| Boutique hotel | 8.00%-9.50% | 60-65% | Specialist commercial lenders |
| B&B / small hotel | 8.50%-10.00% | 55-65% | Specialist + niche lenders |
| Serviced apartments | 7.50%-9.00% | 60-70% | Challenger + specialist |
These **hotel mortgage rates** assume a clean credit profile, 2-3 years of trading accounts and an experienced operator. Weaker profiles attract higher **interest rates** or lower LTV.
Hotel Mortgage Lenders and Lender Appetite
The **hotel mortgage lenders** active in the UK split into four broad camps. Understanding which lender suits your deal is the difference between an efficient process and months of wasted effort.
High street banks
Lloyds Bank, NatWest, Barclays and HSBC have limited hotel appetite. They lend on well-located branded hotels, larger established assets and existing customers with broader banking relationships. Loan sizes typically £1m+ and the **hotel mortgage rates** these lenders offer sit at the lower end of the market.
Challenger banks
Aldermore, Shawbrook, Allica Bank and Hampshire Trust Bank have a clearer appetite for trading hotels, usually up to 65% LTV. They are faster than high street banks and accept a wider range of hotel properties, including independents with solid trading records.
Specialist commercial lenders
Together, UTB, LendInvest, Interbay Commercial, Investec and Paragon Bank are the most active hotel lenders, often willing to fund boutique hotels, B&Bs, refurbishment plays and turnaround stories. Pricing reflects the risk, but they will lend where mainstream lenders will not.
Private banks
Coutts, Arbuthnot Latham and Hampden & Co provide bespoke **hotel finance** for HNW buyers, family offices and trophy assets. Useful where the borrower has a broader wealth relationship.
Across our panel we work with high street, challenger, specialist and private lenders. The right answer depends on the asset, the operator, the loan size and the speed required.
How Lenders Underwrite a Hotel
Getting a **commercial mortgage for a hotel** is a fundamentally different process to buying an investment shop or warehouse. Lenders dig into the trading **hospitality business** in detail.
Revenue per available room (RevPAR)
**RevPAR** (revenue per available room) is the headline metric. It combines ADR (average daily rate) and occupancy into one number: total room revenue divided by available room nights. UK 2026 RevPAR benchmarks sit around £90 nationally in Q1, with London at roughly £140 and regional cities in the £60-80 range.
Lenders compare your RevPAR to STR benchmark data for the local competitive set. Material underperformance suggests operational issues; outperformance is rarely assumed to continue at the same level in the underwrite.
ADR and occupancy rates
ADR and **occupancy rates** are stress-tested separately. Most lenders want to see 65%+ annual occupancy for established properties and clear evidence that low-season trading still covers debt service. Hotels with material seasonality need stronger DSCR cover.
F&B and ancillary income
Food and beverage, events, spa and parking income is reviewed line by line. F&B should stand on its own as a profitable department, not subsidised by room revenue. Conferencing and events income can be lumpy and is typically discounted in the **lender** model.
GOP margin and EBITDA
Gross operating profit margin (GOP) is the test of operational quality. UK 2026 benchmarks: budget hotels 35-45%, mid-market 30-40%, boutique 25-35%. Adjusted EBITDA, after normalising for owner add-backs and one-offs, drives the **value of the hotel** for mortgage purposes.
Brand, Franchise and Operator Covenants
Branded hotels carry a different risk profile to independents. Lenders form a view on the brand, the franchise terms and the operator.
- Branded franchise (Premier Inn franchise, IHG, Marriott, Hilton, Best Western): system reservations, brand standards, capex commitments. Generally favoured by lenders.
- Management agreement with a third-party operator: lender focuses on the operator covenant and the agreement length.
- Independent operator: greater flexibility, more lender scrutiny on the team behind the hotel business.
- Owner-operated: the most common SME structure; operator experience and personal track record are central.
For branded properties, the lender reviews the franchise agreement (term, termination rights, capex schedule, PIP cycles) and may require a comfort letter from the brand. The franchise fee structure feeds directly into the **business plan** and serviceability model.
Leasehold vs Freehold Hotels
Tenure has a direct impact on **hotel funding** options.
- Freehold: preferred by lenders, full security, broadest market.
- Long leasehold (50+ years unexpired): most lenders comfortable, subject to lease review.
- Medium leasehold (25-50 years): narrower lender panel, often shorter loan term to match.
- Short leasehold (under 25 years): very limited options, typically specialist only.
Leasehold hotels with onerous ground rent reviews, restrictive user clauses or weak alienation provisions can be hard to mortgage. A specialist broker will flag these issues before you spend money on legal due diligence.
Capex Cycles: FOH and BOH Refurbishment
Hotels need recurring capex to remain competitive. Lenders model both front-of-house (FOH) and back-of-house (BOH) refurb cycles into the **finance options** they offer.
- FOH (rooms, lobby, restaurant): typically refreshed every 5-7 years, full refurb every 10-12 years.
- BOH (kitchen, plant, M&E, back office): refresh every 10-15 years.
- Branded properties: PIP (property improvement plan) cycles dictated by the franchisor.
Where a hotel needs near-term capex, lenders will either reduce LTV, require a capex reserve account, or fund the works through retained drawdowns. For larger refurbs, [development finance](/services/development-finance) or a bridge into term loan structure may suit better than a single **commercial mortgage**.
Existing Properties vs New Hotel Acquisitions
The lender approach differs between refinancing **existing properties** you already trade and financing a **new hotel** acquisition.
Existing hotel refinance
For an **existing hotel**, lenders look at three years of audited accounts, current management accounts and your operating track record. **Refinance** is generally simpler because the trading evidence is in front of the lender from day one.
Common **refinance** drivers: maturing facility, capital release for refurb or expansion, improved rates as trading has strengthened, or moving away from a lender that no longer wants the sector.
New hotel purchase
**Buying a hotel** as a new acquisition is harder. The lender underwrites the seller's accounts plus your business plan for the asset. Your relevant **hospitality** track record carries significant weight. First-time **hotel owners** generally need either an experienced operating partner or a smaller, simpler asset to start with.
LTV, Deposit and Repayment Structure
Hotel LTVs are lower than standard commercial property because the income is operational rather than contractual rental.
| Factor | Typical range |
|---|---|
| Maximum LTV | 60-70% (occasionally 75% for prime branded) |
| Minimum deposit | 30-40% of purchase price |
| Loan term | 5-25 years (commonly 15-20) |
| Interest rates | 7.00%-10.00% |
| DSCR requirement | 1.30x-1.50x adjusted EBITDA |
| Arrangement fee | 1-2.5% of loan |
| Repayment basis | Capital and interest, or interest-only with sinking fund |
The **repayment** structure typically blends capital amortisation with interest. Some lenders allow part interest-only, particularly during a capex programme, but most require full **repayment** profile by maturity. Use our [commercial **mortgage calculator**](/calculators/commercial-mortgage) to model **repayment** scenarios against your projected trading.
Business Plan and Documentation
A strong **business plan** is non-negotiable for any **hotel mortgage** application, especially for **buying a hotel** for the first time.
Lenders want to see:
- 3 years of trading accounts (where available) plus current management accounts
- 12 months of bank statements and VAT returns
- STR or AM:PM benchmarking data for the local competitive set
- Forward booking pace and group/corporate contract pipeline
- Personal asset and liability statement, plus personal and business credit history
- Source of deposit evidence with a clean audit trail
- Operator CVs and relevant hospitality sector experience
- Forward P&L, cash flow and capex projections for 3 years
Weak documentation is the single most common cause of declined applications. A specialist **mortgage broker** ensures the pack is lender-ready before submission.
How to Get a Hotel Mortgage: Application Process
The process to **get a commercial mortgage** for a hotel typically runs 10-16 weeks. The steps below are how we run it for clients.
- Initial review with a specialist hotel mortgage broker: asset, accounts, deposit, deal structure.
- Lender shortlist matched to the asset, sub-type and operator profile.
- Indicative terms from 2-3 lenders within 7-10 days.
- Formal application to the chosen lender with full documentation pack.
- Valuation by a RICS-registered hotel specialist (profits-method basis).
- Credit submission and approval, typically 3-6 weeks.
- Legal work in parallel with credit; specialist hospitality solicitors recommended.
- Completion and drawdown.
Alternative Finance Options for Hotels
Not every hotel deal suits a long-term **commercial mortgage**. The wider **finance options** include:
- Bridging finance for fast acquisitions, auction purchases or pre-refurb situations.
- Development finance for major conversions, extensions or ground-up hotel projects.
- Asset finance for FF&E and technology refresh.
- Cashflow business loans for short-term working capital where the property is not the right security.
- Mezzanine behind a senior commercial mortgage for stretched gearing on branded acquisitions.
For most stabilised hotels, a long-term **commercial mortgage** remains the most cost-effective **business mortgage** solution. We talk through every option with clients so the structure matches the asset and exit plan.
Why Use a Specialist Hotel Mortgage Broker
Hotel finance is a narrow specialism. Most mainstream brokers do not understand RevPAR underwriting, profits-method valuations, brand covenants or PIP cycles. The result: misaligned lenders, wasted application fees, valuations on the wrong basis.
At Commercial Mortgages Broker we work across the whole panel of **specialist commercial** hotel lenders, challenger banks, high street banks and private banks. Our ex-banking background means we know how each **lender** underwrites the **hotel finance** book and how to present a deal that fits.
We tailor each application to the lender, the asset and the **business owners** behind it. That is how you secure the **best hotel mortgage** terms available for your circumstances. Whether it is your first hotel or an addition to an existing portfolio, the right **mortgage experts** make the difference.
[Contact our team](/contact) to discuss your hotel mortgage requirements and we will come back with indicative terms within 48 hours.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*