Condo Hotel Mortgage Rates And Terms
This BLOG On Condo Hotel Mortgage Rates Was Updated And PUBLISHED On May 13, 2025.
As of mid-May 2025, financing a condo hotel (condotel) remains a specialized endeavor, distinct from traditional residential or investment property mortgages. Condotels, which blend condominium ownership with hotel-style amenities and rental programs, present unique financing challenges and opportunities. In this article we will breakdown what is the current condo hotel mortgage rates, who qualifies and what are the available loan options.
Current Condo Hotel Mortgage Rates
Condo hotel mortgage rates are normally higher than those of standard residential properties due to their classification as non-warrantable condos. This type of property doesn’t meet regular loan rules because it has things like shared spaces, front-desk check-in, and short-term rental programs.
- Interest Rates: Condo hotel mortgage rates usually range between 6.5% and 7.5% as of May 2025. This is influenced by broader economic factors and the unique risks related with condotel investments.
- Comparison with Traditional Mortgages: For context, the national average 30-year fixed mortgage APR stands at 6.91%.
Key Financing Terms for Condotels
Financing a condotel involves specific terms that is different from conventional mortgages. Loan-to-Value (LTV) rations for primary or second home is up to 75%, requiring a 25% down payment. For investment property, it’s up to 60% LTV, needing a 40% down payment. A minimum FICO score of 680 is typically required. Debt-to-Income (DTI) ratio is generally capped at 40%. Lenders often require 12 months of reserves, which can include retirement accounts or other liquid assets. Condotel financing is primarily available through Non-Qualified Mortgage (Non-QM) or portfolio loans, as they don’t meet Fannie Mae or Freddie Mac guidelines.
Adjustable-Rate Mortgage (ARM) Options
Given the nature of condotel financing, lenders often offer ARM products. These ARMs usually have caps on condo hotel mortgage rates increase to protect borrowers from significant payment shocks.
- 3/1 ARM: 3 years fixed rate, adjusting annually thereafter.
- 5/1 ARM: 5 years fixed rate, then annual adjustments.
- 7/1 ARM: 7 years fixed rate, followed by yearly changes.
Alternative Financing Options
For borrowers who may not qualify for traditional lending, alternative financing options are available like Debt Service Coverage Ratio (DSCR) Loans. This allow up to 85% LTV for purchases, do not require employment or income verification, and accept short-term rental income for qualification. Another one is Alt-Doc Loans. It utilize alternative documentation, such as bank statements, for income verification, and suitable for self-employed individuals or those with non-traditional income sources.
Regional Considerations
Condo hotel mortgage rates and financing terms can change based on location. In Hawaii, lenders might require a down payment of 25% with loan amounts up to $1,209,750. Florida and Nevada states have higher concentration of condotels leading to more established lending programs and potentially more favorable terms.
What Are Condotels and Non-Warrantable Condos?
If you’re eyeing a unique property like a condo hotel unit or a non-warrantable condo, you’re not alone. These properties are gaining popularity with vacationers, remote workers, and real estate investors alike. But financing them is a whole different story from a standard home loan. Below, we will break down what condotel and non-warrantable condo financing is, who qualifies, and what loan options are available.
- Condotel (Condo Hotel)
A condotel is a condominium located in a resort or hotel setting. It offers hotel-style services like front desk check-in, housekeeping, rental pools, and vacation rental use by owners or hotel management. An example is a beachfront suite in Miami or a ski-in-ski-out condo in Lake Tahoe rented out by the hotel when you’re not using it. - Non-Warrantable Condo
A condo becomes non-warrantable when it does not meet Fannie Mae or Freddie Mac guidelines due to too many units owned by one person or entity, high percentage of renters vs. owners, ongoing litigation, inadequate reserves in the HOA budget, and hotel-like amenities (like short-term rentals). These factors make them riskier in the eyes of traditional mortgage lenders.
Financing Options for Condotels and Non-Warrantable Condos in 2025
Since conventional lenders won’t finance these properties, you’ll need a portfolio loan or non-QM mortgage. Here are your main options:
Portfolio Loans:
Offered by lenders that keep loans in-house (not sold to Fannie/Freddie). Flexible underwriting. Case-by-case approval
Terms:
- Interest rates: 7%–9% (higher than conventional)
- Down payment: 20%–40%
- Loan types: Fixed, ARM, Interest-only options available
Non-QM (Non-Qualified Mortgage) Loans:
Designed for borrowers who don’t meet traditional documentation or guidelines. Perfect for self-employed borrowers or investors.
Features:
- Accept bank statements or asset depletion instead of tax returns
- May allow DSCR (Debt Service Coverage Ratio) qualification
- Credit scores down to 620 or even no score
DSCR Loans for Investors:
Ideal if you’re buying the unit strictly for rental income.
Highlights:
- No income documentation
- No employment verification
- Approval based on rental income covering mortgage payment
- LTV up to 80–85% for strong cash-flowing units
Advantages & Disadvantages of Condotel and Non-Warrantable Condo Financing
One of the advantages of Condotel and Non-Warrantable Condo financing is you can earn passive rental income and use the rental income to offset the mortgage. Also, since it’s often located in prime vacation destinations, you can enjoy a vacation property when you want. The disadvantages are it has higher rates and down payments, and limited lenders offer these loans. Also, it is not eligible for Fannie/Freddie or government loans, and HOAs may have strict rental or usage rules
California Condo Hotel Mortgage Rates
As of May 2025, securing financing for condo hotels (condotels) in California presents unique challenges due to their classification as non-warrantable properties. This classification uprises from features like shared amenities, front-desk services, and rental programs that don’t align with conventional lending guidelines. Consequently, traditional lenders often avoid financing such properties, leading borrowers to seek alternative financing options. Gustan Cho Associates are California Mortgage Loan Specialists.
Current Condo Hotel Mortgage Rates in California
Condo hotel mortgage rates in California are typically higher than those for standard residential properties. This is because of the perceived increased risk associated with non-warrantable condos. While exact rates can vary based on the lender and borrower qualifications, they generally range between 6.5% and 7.5%. This is notably higher than the national average 30-year fixed mortgage APR of 6.91% as of May 13, 2025.
Benefits of Getting a Condotel in California
- Earn Rental Income When You’re Not Using It
Most condotels offer rental programs that let you rent out your unit like a hotel room. You can make extra money without doing all the work yourself. - Enjoy a Vacation Spot You Own
You get your own personal getaway in places like San Diego, Palm Springs, or Santa Monica—whenever you want, no booking needed. - Professional Management Takes Care of Everything
No need to clean, handle check-ins, or market your unit. The hotel staff takes care of all that for you. - Prime Locations Near Beaches, Airports, and Attractions
Most California condotels are in high-demand areas—close to the ocean, nightlife, airports, or major attractions—which helps boost rental income and long-term value. - Lower Maintenance and Stress
Unlike owning a regular vacation home or Airbnb, condotels require less upkeep. The property is run like a hotel, so it’s regularly cleaned and maintained. - Potential Tax Deductions
If used as a rental, you might qualify for tax deductions on HOA fees, mortgage interest, property taxes, and even depreciation. (Talk to a tax advisor.) - Affordable Entry into Luxury Living
You can often get a luxury condo in a 4- or 5-star building for less than buying a full-size home in the same area. - Flexible Usage
Use it part-time, rent it the rest of the year, or only during peak tourist season. Many owners create their own schedule for personal use and rental time. - Appreciation in Value Over Time
Desirable California markets like Los Angeles, San Francisco, Napa, and coastal towns tend to appreciate long-term, especially if tourism remains strong. - Great Option for Snowbirds or Retirees
If you live part of the year out of state, a condotel gives you a worry-free place to stay when you’re in California—without full homeowner responsibility.
Frequently Asked Questions About Condo Hotel Mortgage Rates
What is a condo hotel (condotel)?
A condo hotel is a condo unit in a hotel building. You can own it like a regular condo, but the hotel can rent it out when you’re not using it.
Can I get a regular mortgage for a condotel in California?
No. Most regular banks and lenders won’t offer traditional mortgages for condotels. You’ll need a non-QM or portfolio loan from a lender that works with non-warrantable condos.
What are the current condo hotel mortgage rates in California?
As of 2025, condo hotel mortgage rates in California are usually between 6.5% and 7.5%, depending on your credit, down payment, and property location.
How much down payment do I need for a condotel?
For second home it is usually 25% down. For investment property, it is often 35% to 40% down.
What credit score do I need to qualify?
You’ll usually need at least a 680 credit score, but some lenders may accept a little lower with higher rates or more money down.
Can I use the rental income to help qualify?
Yes. If you’re using a DSCR loan, lenders will look at the property’s rental income to decide if it can cover the loan payment.
What is a non-warrantable condo?
It’s a condo that doesn’t meet normal lending rules usually because too many units are rented out, there’s a front desk, or there are hotel-like services.
Are rates for non-warrantable condos and condotels the same?
Condo hotel mortgage rates and non-warrantable rates are similar—both are higher than normal mortgages. But condotels are often seen as even riskier, so their rates may be slightly higher.
Can I refinance a condotel loan later if rates go down?
Yes, you can refinance once the condo hotel mortgage rates go down but you’ll likely need to stay with a non-QM or portfolio lender unless the building changes and becomes warrantable in the future.
Where can I get a condotel mortgage in California?
Work with a specialized lender like Gustan Cho Associates, who are experts when it comes to condo hotel mortgage rates and offers condotel and non-warrantable condo loans with flexible guidelines and no lender overlays.
Final Thoughts: Condo Hotel Mortgage Rates And Terms
Financing a condotel in 2025 requires navigating a complex landscape of higher condo hotel mortgage rates, substantial down payments, and stringent qualification criteria. However, for those seeking a blend of vacation home enjoyment and rental income potential, condotels remain an attractive option. Engaging with lenders experienced in condotel financing and exploring alternative loan products can enhance the likelihood of securing favorable terms.
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