CONDOTEL MORTGAGES—HOW AVAILABLE ARE THEY?
With the onset of a surge of condo-hotel building and conversions in Central Florida, many buyers, builders, and mortgage brokers are discovering that acquiring mortgages on the condotel units is not as readily available as it would seem. Many buyers are entering contracts to purchase without realizing that the terms are substantially different from those available on a standard condominium.
Many builders are seeking advice from mortgage lenders from early on to ensure the availability of competitive mortgages to their buyers. Others, unfortunately, having left it as an after thought, find themselves with buyers who were not made aware of the increased deposit, and higher interest rates that may come with purchasing specialized type property. The problems may be further exasperated by many mortgage companies not understanding the nuances of this property type either. “Mortgages are certainly available, and many competitive programs,” says Justine Assal, owner of ACM Home Loans “but buyers must be introduced to lenders and brokers that specialize in condotel financing, Otherwise, everyone ends up on a wild goose chase realizing that the condotel doesn’t qualify for the loan program that the buyer has been approved for. This can happen day (or hours) before the scheduled closing resulting in a denial of the mortgage”.
Justine Assal, owner of ACM Home Loans has been specializing in the financing of condotels for several years and works with developers and real estate firms from the onset of the project to ensure that everyone is aware of the differences. She is frequently contacted about projects whose buyers are unable to find the type of financing that they are looking for.
“Many condotel projects, especially those converted from hotels, are less than 600 square feet, which generally limits the loan to value available to 80% or less. As long as the buyers are aware of this from the beginning, they are usually very accepting of the available terms. I have found that many of the condotel units under contract in various conversions and new projects have been sold to foreign national buyers, many of whom have purchased multiple units. This increases the difficulty of obtaining financing greatly and causes a lot of stress to everyone involved”
“I think that the concept of condotels is a great one but not all condotels are created equal, and thus availability of mortgages is on a case by case basis. Buyers need to be made aware of this early on so that there are no surprises when it comes time to close”
With so many new projects coming out of the ground, and so many hotels being converted, Central Florida seems to be following in the footsteps of other major resort areas, such as South Beach and Las Vegas. A place to stay in the sun with rental income to help offset costs! A dream come true for most real estate investors along with vacationers that do not want the cost or upkeep of a house. Just be sure that you know the mortgage terms, with a mortgage lender that understands this property type from the beginning.
