3 Questions to Ask When Considering a Hotel Refinance

3 Questions to Ask Yourself When Considering a Hotel Refinance

And a Free Online Calculator to Check Current Rates and Compare Savings

July 19, 2018


Hotel Loan Hub Refinance Calculator

The hotel financing market is changing. The Federal Reserve has increased prime interest rates twice so far in 2018 and has proposed two possible hikes later this year. Here are a few questions to see if refinancing is a good option for your hotel investment.  


To check out current interest rates and see if there could be savings by refinancing your current mortgage, try the free hotel loan refinance calculator on https://Hotelloanhub.com/calculator.


One, what is your exit plan?


The outlook for the hotel industry is optimistic. Most industry veterans believe there are still two years before the end of the current cycle, and I expect a much more gradual shift than at the end of the last cycle. Hotel transaction volume continues to be strong. Additionally, key performance indicators are strong. Occupancy growth may have slackened, but the national average occupancy is expected to stabilize around 69%, according to Costar, which is well above the historical average. Additionally, average daily rate is expected to steadily grow around 2 – 3%.


It is a good time to enjoy operating profits. That said, the best time to sell a hotel is during the upswing. But if you plan on holding your hotel investment several years or more and your current loan rate is either variable or a high fixed rate, you could see significant savings by refinancing with a locked-in fixed rate and/or longer amortization.


Of course, if your current hotel mortgage note is maturing, you must refinance unless you plan to sell.





Two, could you get a fixed rate loan or better loan terms?


You may be considering a hotel refinance to get better loan ters or get cahs out. Better loan terms could include a lower interest rate, fixed interest rate, or longer amortization period, among other factors.


Currently, several loan programs offer a fixed interest rate for hotel refinancing, but these are not universally available.


SBA 504 - The SBA 504 refinance program is available for hoteliers that have not maxed out their SBA debt limit of $5,000,000 (with exception of a qualified green project).  On the first mortgage, lenders are typically looking at a 5-year fixed rate, re-fixing every 5 years; meanwhile, the SBA portion will remain fixed for the 20 or 25-year term of the loan. However, the national SBA 504 lenders prefer larger markets with less perceived risk. In smaller markets, lender interest may be limited to local and regional banks.


USDA - The USDA loan program is usually fixed-rate, but is only available in smaller markets, and it is a time-consuming process.


Conventional - Lenders may consider a conventional refinance loan if you have enough equity in the hotel.


CMBS – Commercial Mortgage Backed Securities loans are generally available with a minimum of 30% equity. Lenders typically look for stronger deals such as newer hotels of midscale to upscale brands, in good condition, and in the larger metropolitan areas. If you are growing your hotel portfolio, you may like that CMBS loans are non-recourse and fixed rate for the 5, 7, or 10-year term of the loan. 


Three, could you have a lower monthly payment or pull cash out?


Use Hotel Loan Hub’s Refinance Calculator to get a ball-park idea of current rates and terms.  The Refinance Calculator will compare results with your current monthly payment to determine if you could have a lower monthly payment or get cash out. 


In this changing finance market, and with two more possible interest rate hikes on the horizon, don’t over-pay for debt and don’t miss this window.  If you are ready to refinance your hotel, you can compare multiple term sheets side by side to get the best rate and terms available for your deal. Plus, it’s free to apply and compare terms. Once your hotel loan closes, you will pay only a flat software usage fee that’s lower than standard mortgage broker fees.  


MBA Hotel Brokers and MBA Capital Funding partnered with Hotel Investor Apps to develop Hotel Loan Hub, designed to make it easier for hoteliers to take charge of their own financing.


Start a Refinance Application here: https://www.hotelloanhub.com/questionaire


‘Til Next Time


Charlie Fritsch,

Jaime Goss, and

Lynda Drehmer


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MBA Capital Funding Inc. is a commercial mortgage and financing services firm, specializing in arranging debt and debt structures.