Have you heard of condotels? If you’re familiar with the Grand Strand in Myrtle Beach, you’ve probably seen a lot of our high-rises and resorts in the area. We call these properties condotels because they are individual condo units that function in much the same way as hotels do. What should you know about them?
After the subprime market collapse from 2008 to 2011, financing for condotels became virtually non existent. In fact, it’s important to note that right now, condotels are not Fannie Mae or Freddie Mac-approved. This means that you can’t go to the traditional mortgage companies or banks and get a loan because they can’t sell them on the open market.
There is a solution, however, because a lot of local banks have some great condotel programs that will take care of the financing. We call these “portfolio loans” because they don’t sell the mortgage, but rather keep it in-house and finance the property.
What does this mean to you if you’re interested in buying a condotel? It means that you’re going to have to put a minimum of 20% to 25% down when purchasing the property. The portfolio loan will finance 75% to 80% loan-to-value. Also, your interest rate will probably be slightly higher; rather than paying 3.5%, you’ll pay 4%, which is still a phenomenal rate. One of the differences between this and a conventional mortgage is that you’re going to be at either a 15-year amortization or at a five-year adjustable-rate mortgage.
So if you’re wondering whether it is possible to finance a condotel, my answer is yes! It’s just a little bit different than other types of financing. If you have any other questions about condotels or buying or selling property in the Myrtle Beach area, give me a call or send me an email. I’d be happy to help you!
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Greg Sisson, Realtor
The Hoffman Group
Serving the Grand Strand