Hotel mortgages and long-term term loans
The long-term, amortising commercial mortgage that holds a stabilised hotel, used to refinance onto term debt or to settle a hotel onto its permanent capital structure.
What is a hotel term loan?
A hotel term loan is the long-term commercial mortgage that holds a stabilised, trading hotel. It is the permanent debt that a hotel settles onto once it is trading reliably, whether refinancing off a bridge, a development facility or a stabilisation loan, or simply moving from one term lender to another. It is what most people mean by a hotel mortgage: a term loan, secured by a first charge, repaid over years from the hotel's trade.
Term lenders size the loan on stabilised performance. They want to see settled occupancy, a steady ADR and RevPAR, and an EBITDARM that covers the debt service with headroom across the cycle. Because the trade is proven rather than projected, a term loan is the cheapest debt in the hotel's life, which is why the whole point of bridging, stabilisation and development finance is to reach the point where a term loan fits.
Most hotel term loans amortise, repaying capital and interest over the term so the debt reduces and the owner builds equity, though an interest-only structure is available for the right profile and a lower loan to value. Rates are set as a fixed rate or a margin over the Bank of England base rate or SONIA, with the strength of the trade and the brand or franchise covenant driving the pricing.
We place hotel term loans across the clearing and challenger banks and specialist lenders that hold the sector long term, names such as Allica Bank, Shawbrook, OakNorth and the high-street commercial lenders, and we compare the whole market on the full cost of the deal, not the headline rate alone.
A term loan is also where the choice between owner-occupier and investment lending is settled. Where the borrower both owns and runs the hotel, the lender sizes the loan on the operating company's EBITDARM and usually takes a debenture and personal guarantees. Where an investor owns the freehold and lets the hotel to a separate operator or a brand, the loan is sized on the lease and the rent cover and the tenant covenant instead. The two are underwritten differently, and a small number of cases involving an individual borrowing partly against a dwelling can fall inside the regulated mortgage perimeter, which we refer to an authorised firm. We confirm the correct route before approaching lenders, because it changes which lenders will look at the deal and on what terms.
- Long-term, amortising commercial mortgage on a stabilised hotel
- Sized on settled occupancy, ADR, RevPAR and EBITDARM cover
- The cheapest debt in a hotel's life, the target of every refinance
- Capital and interest, or interest-only on the right profile
- Priced as a fixed rate or a margin over base or SONIA
- Placed with Allica Bank, Shawbrook, OakNorth and the clearing banks
Indicative terms
- Loan sizeFrom around 500,000 pounds, no fixed ceiling on strong covenants
- Loan to valueUp to 65 to 70 percent of going-concern value
- Term15 to 25 years
- RateIndicatively from around 7 to 10 percent, or a margin over base or SONIA
- RepaymentCapital and interest amortising, or interest-only on the right profile
- Interest coverTested on stabilised EBITDARM across the cycle
- Key testsOccupancy, ADR, RevPAR, brand or franchise covenant
- SecurityFirst legal charge over the hotel, debenture on the operating company
Indicative only. Terms vary by lender, scheme and borrower and are not an offer of finance.
Who it suits
- Operators refinancing a stabilised hotel off a bridge or development facility
- Owners moving from a stabilisation loan onto permanent term debt
- Operators on a rate that is no longer competitive after a fix ends
- Hotel groups settling acquired assets onto a single term structure
- Investors holding a let hotel and wanting long-term amortising debt
Discuss hotel term loans
A view on fundability within one working day.
How we arrange a hotel term loan
Review the trade and debt
We review the stabilised trading accounts, the existing facility, the rate, the remaining term and any early repayment charge, and confirm what the term loan needs to achieve.
Terms across the market
We approach the term lenders whose criteria fit the hotel and bring back indicative terms on loan, rate, amortisation and structure.
Valuation and underwriting
The lender instructs a going-concern valuation and underwrites the trade, the brand or franchise position and the operating company.
Offer and completion
The formal offer is issued, any existing debt is redeemed, the legal work completes and the hotel settles onto its term loan.
Who can borrow and what lenders look for
A term lender underwrites a stabilised hotel on proven trade. They want trading accounts showing settled occupancy, a steady ADR and RevPAR, and an EBITDARM that covers the debt service with headroom across the cycle, not just in a strong year. They assess the brand or franchise covenant, the operator's track record, the market and its seasonality, and the quality of the building and its capital expenditure record. Because the loan is long term, they care about durability: a hotel with a recognised franchise and consistent trade presents the cleanest case, while a seasonal or single-demand-source hotel needs more headroom and a lower loan to value. A regulated owner-occupier element, where it arises, is referred to an appropriately authorised firm. Lenders also weigh the capital expenditure record: a hotel that has reinvested in its rooms and plant on a sensible cycle is a more durable asset than one that has been starved of capital, because deferred refurbishment becomes a future drag on RevPAR and a hidden liability against the loan. We assemble the stabilised trading story, the capex history and the value evidence so the lender sees the hotel as the durable, financeable asset it is, and we explain the seasonality and any concentration of demand before the lender finds it, because a problem flagged early is a condition rather than a decline.
How much you can borrow
A hotel term loan runs up to around 65 to 70 percent of the going-concern value, with the binding constraint usually interest cover on stabilised EBITDARM rather than loan to value alone. Lenders size the loan so the trading profit covers the debt service with comfortable headroom across the cycle, and an amortising structure tightens that test a little against an interest-only one, because the repayment includes capital. The achievable figure follows the trade and the location: Knight Frank and HotStats put London RevPAR at around 233 pounds and regional UK at around 98 pounds in Q3 2025, and going-concern prices at around 315,000 pounds a room in London against 129,000 pounds regionally, so the same loan to value buys very different absolute debt in different markets. The choice between amortising and interest-only also shifts the affordable loan: an interest-only structure carries a lower monthly cost and so supports a slightly larger loan on the same cover, but lenders reserve it for lower loan to values and stronger covenants, and the capital still has to be repaid or refinanced at the end. Most operators take an amortising loan because reducing the debt steadily builds equity and de-risks the next refinance. We model the stabilised EBITDARM, the amortisation profile and the affordable loan under both structures before approaching lenders, so the figure is grounded in the hotel's proven trade and you can see what each repayment basis costs.
Rates and costs
Hotel term loan rates are indicatively from around 7 to 10 percent, the keenest pricing in the hotel finance family because the trade is proven, set by the strength of the EBITDARM cover, the brand or franchise covenant, the loan to value and the term, and quoted as a fixed rate or a margin over base or SONIA. Amortising loans build equity as they repay, so although the monthly cost is higher than interest-only, the debt reduces over the term. Expect a lender arrangement fee of around 1 to 2 percent, a going-concern valuation, legal fees for both sides, and on a refinance any early repayment charge on the facility being redeemed. The choice between a fixed rate and a margin over base or SONIA is a genuine decision rather than a detail: a fix gives certainty of cost over the fixed period and protects against rate rises, but usually carries an early repayment charge if you redeem or refinance within it, while a variable margin moves with the base rate and is easier to exit. We disclose our broker fee in writing, compare the all-in cost across the market including the impact of any early repayment charge on a future refinance, and never claim an exclusive tie to any lender, so the recommendation rests on the full numbers.
Term loan, bridging or stabilisation finance
A term loan is the right product when the hotel is trading at a stabilised level and you want long-term, amortising debt to hold it. It is the cheapest debt in the hotel's life and the destination of every other facility. If the hotel cannot yet support a term loan because it is closed, mid-refurbishment or still ramping, bridging or stabilisation finance carries it until it can, then refinances onto the term loan. If you are building or converting, development finance funds the work, then a term loan holds the finished, stabilised hotel. We position the hotel on that path and arrange the term loan as the long-term home for the debt once the trade is proven.
Hotel term loans: common questions
Can you get a mortgage on a hotel?
Yes. A trading hotel is financed with a commercial mortgage, a term loan secured by a first charge and sized on the hotel's stabilised EBITDARM and going-concern value. Specialist lenders, challenger banks and the clearing banks all lend on hotels, and we place the term loan with the lender whose criteria best fit the trade.
How long is a typical hotel mortgage term?
Hotel term loans typically run 15 to 25 years, usually amortising on a capital-and-interest basis so the debt reduces over the term, with interest-only available for the right profile at a lower loan to value. The term is set to keep the monthly repayment comfortably covered by EBITDARM.
What is the 3 7 3 rule?
The 3 7 3 rule is a lending rule of thumb, more common in the United States, describing a loan that is fixed for the first three years, adjusts over the next seven, and is reviewed at three-year intervals. UK hotel term loans are instead structured as a fixed rate or a margin over base or SONIA over a 15 to 25 year term, with periodic rate reviews on variable facilities.
What salary or profit do I need for a large hotel mortgage?
A hotel term loan is sized on the hotel's EBITDARM, not on a personal salary, because the trade services the debt. Lenders want the trading profit to cover the repayment with headroom, often comfortably above the debt service, so the question is what the hotel earns rather than what the owner earns. We model the affordable loan from the accounts.
Can I refinance a bridge onto a hotel term loan?
Yes, and it is one of the most common refinances we arrange. Once a hotel bought on a bridge is trading at a stabilised level, refinancing onto a term loan moves you from high monthly bridging rates to far cheaper annual term rates, which is usually the plan from the day the bridge is taken out.
Discuss hotel term loans
Send us your scheme and we will come back with a view on fundability and likely terms within one working day.