Condotel Financing: How Does It Work?

Condotel Financing: How Does It Work?

Table of contents

Many homeowners are struggling to finance a condotel or luxury condominium. These properties do not meet the conventional loan requirements of Freddie Mac or Fannie Mae, so there are a limited number of mortgage lenders who will finance these properties. Many specialized lenders will finance a condotel or non-warrantable condominium. What is a condotel, and how do you get a condotel mortgage?

Key takeaways

  • Condotel is a unique property combining a condo and a hotel, requiring different financing and allowing for rentals.
  • Condotel loans are non-traditional, and specialized lenders are needed as big banks are often unwilling to underwrite them.
  • Non-warrantable condos do not meet traditional lending requirements, and financing follows the same basic standards as for condotels.

What is a condotel?

A condotel is a combination of a condominium and a hotel and is a unique type of property ownership. Each condotel is a part of a large-scale property that operates similar to a hotel, with a wide range of amenities and resort-style features. A condotel owner purchases a unit within the property and uses it as a second home or vacation spot while renting it out through the main property. Because of this unique arrangement, loans for condotels require different financing requirements and allow for different things. This includes:

Loan information

  • Down payment minimum of at least 15%
  • Available financing for vacation/second homes up to 85% LTV to $3M
  • Available financing as an investment property up to 85% LTV to $3M
  • Classification as a second home allowed
  • Cash-out options for investment/vacation/2nd home up to 70% LTV


  • Allows for daily, nightly, weekend, or longer rentals
  • High investor concentration
  • Loan can qualify for the 1st unit in the complex
  • Will finance for individuals/entities owning more than 10% of units

What is a non-warrantable condominium?

A non-warrantable condominium is any condo that does not meet the traditional Fannie Mae or Freddie Mac lending requirements. A condominium is non-warrantable if it features one of the following requirements:

  • Requires a membership, such as a golf or country club
  • Is part of a continuing care facility
  • Is currently party to a lawsuit
  • Allows individuals/entities to own more than two units/20% of the property
  • The property features commercial space exceeding 35% of total property space
  • Has 15% or more of the units that are delinquent on HOA dues
  • Operates as a hotel or motel, such as a condotel

Financing for a non-warrantable condominium has the same basic loan standards and allowances as you see with a condotel.

How do condotel loans work?

Condotel loans are considered non-traditional loans as they do not meet the traditional mortgage requirements. However, they still require you to meet certain income, asset, and credit score requirements. In many cases, the loan requirements focus more on the property and the buyer. For example, many lenders will require the condotel to be at least 600 sq. ft. and have basic kitchen facilities and separate bedroom space. Once the requirements are met, the loan process follows the same steps as a traditional loan.

Challenges of getting condotel loans

Condotel or non-warrantable condominium financing is slightly different from a traditional loan. Because a condotel or non-warrantable condo does not meet the requirements of a conventional Fannie Mae or Fannie Mac mortgage, many big bank lenders will not take the risk of underwriting these loans. This means that you will need to find an approved lender specializing in non-standard mortgages. Once you do this, the mortgage process is very similar to a conventional mortgage.

How to get condotel and non-warrantable condo loans?

Once you find a lender specializing in non-traditional mortgages, applying for your loan is not much different. The lender will evaluate the property, ensuring it meets their property qualifications, such as the minimum square footage and property layout. In addition, you must meet their borrower qualifications, including a minimum credit score which is often 680. They will require income and asset information similar to a traditional loan. You must also meet the LTV requirements and have the minimum down payment required. In some instances, lenders will also look at the financial health of the condotel property in general when determining your loan.

When you apply for a condotel or non-warrantable loan, you can expect rates that are at least a half-percent higher than thof or conventional loans. However, because smaller lenders underwrite these loans, mortgage approval times are often shorter than those with big banks.

Let Hero Home Programs help you through the loan process.

Because condotel and non-warrantable loans are considered non-traditional, many borrowers expect them to be difficult. The truth is the hardest part of getting a loan for these properties is finding a lender that underwrites non-traditional mortgages. Once you find one of these lenders, the process is usually very straightforward.

However, at Hero Home Programs, we understand that these unique financing options can be intimidating or confusing. Our goal is to help borrowers achieve their homeownership and our experts can help.

Speak to us today to see how Hero Home Programs can help you achieve the financing you need.

Picture of Jacquelyn Sublett
Jacquelyn Sublett

I love teaching and writing on real estate, finance and mortgage topics. I find it fulfilling hearing stories of first time home buyers who we have helped with the home buying process. Writer for the Hero Homebuyer Programs™

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