A Review of the Construction Hotel Loan Program
National lenders thrive on larger loans, they feel less need to give out loans that are smaller than 3 million. However for stronger projects the lender may consider a loan of less than 3 million. The rate of the loan will be between 4.5% and 6% and will only be applied during the construction period.
Initial Deposit & Costs
The initial deposit for the Construction Hotel Loan is usually between $10 and $25K. Once the Letter of Intent has been issued by the lenders, the borrower must send the deposit to the lender. The lender will then use this deposit to order the third party reports that are necessary, such as the appraisal and the Phase I report. Any balance that is left over from the deposit will be displayed on the closing statement.
The costs that are listed below consist of any costs we expect to encounter throughout the program. The specific costs, such as lender points, will be calculated once the loan program has determined the hotel construction finances.
- Lender Fees (1 to 1.5 Points)
- Lender Processing Fees (Between 1K and 4K)
- Appraisal and Review (Between 4K and 6K)
- Environmental Phase I Report (2K)
- Survey (Between 2K and 3K)
- Lender Legal Fees (Between 2K and 4K)
- Credit Reports, Tax Services, and Other Costs (Roughly $500)
When you are planning your financial side of things make sure you take these costs into account.
Note that the prepayment will vary depending on whichever program is being used.
The amortization varies depending on whichever loan program is being used as well as the market in which the hotel is located within. For example, if an SBA 7(a) loan is used then the amortization is going to be 25, and if conventional loans are used then the amortization will most likely vary between 15 and 25.
Loan to Value
The Loan to Value depends mostly on whichever program is chosen as well as which market the hotel is going to be located within, and possible the sponsorship.
Debt Service Coverage Ratio
The Debt Service Coverage Ratio is supported by both the appraisal, and the feasibility studies.