Using a commercial mortgage to buy a hotel

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A commercial mortgage can be used to purchase a hotel business.

The hotel industry in

the UK is buoyant. With record temperatures enjoyed this summer, many British people are taking holidays in UK hotels. London and other major tourist cities attract millions of overseas visitors each year, meaning there are plenty of business opportunities for British hotel owners.

If you want a commercial mortgage to purchase an existing hotel, there are a few matters you should be aware of.


Ideally, to run a hotel you need experience in the hotel trade or the hospitality industry. Some mortgage lenders will turn down a commercial mortgage application for a hotel if you have no experience. If you have a good track record of owning a successful business or managing a business outside of the hotel trade, your mortgage application may be considered.

Ascot Mortgages can look at your business proposal and present your loan application to lenders who they think will be able to provide a commercial mortgage.

The hotel business

If the hotel is already trading, the mortgage lender will want to see the accounts, usually for at least the last two years. They will want to see a high occupancy rate and evidence that there is a high demand for hotel accommodation in the area. The hotel will need to be running at a profit, and you should have a business plan for increasing the profits. You may have ideas on how to relaunch the hotel restaurant or attract people to the bar with themed entertainment nights.

The hotel should have a good reputation with many positive reviews on TripAdvisor and other review sites. If there are many negative reviews, you will need to convince the lender that you can turn the business around and increase the hotel’s reputation.

You may need to restructure the business, change the management and alter the marketing strategies. If the hotel is closed, you will need to convince the lender that you can re-open it and run it at a profit

The lender needs to be convinced that their loan is low risk. The business needs to easily afford to repay the monthly mortgage payments.

The loan offer

After the lender is convinced that you are purchasing a viable business, they will make you a commercial mortgage offer. This will include the interest rate and the maximum loan size. You will not be offered 100% of the purchase price, so will have to put around 25% of your own money into the purchase. The loan period will be up to 25 years. If the business can afford a shorter loan period, this saves money on interest payments.

Several documents are required to support the mortgage application. These include personal and business bank statements, accounts if you already run a business, a business plan for the hotel and proof of identity.

Lenders are keen to support the UK hotel industry. Talk to Ascot about your plans to run a hotel and we will find the best-suited arrangement for you.

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