Financing my hotel

By THIS IS MONEY
Updated:

 

I have a mortgage of £66,000 on a small hotel worth £170,000 and I am paying 3.5% above the base rate. I have been offered to remortgage at 2% above the base rate, plus £1,000 fee. Is it worth it? JD, Blackpool.

James Cotton at mortgage brokers London & Country says:

The mortgage on your hotel will be a commercial loan, hence the higher rate you are currently paying compared to residential mortgages.

But when remortgaging, the principals are no different and you have to weigh up the set up costs of any new deal against the monthly savings it will give you.

The deal you have been offered will save you 1.5% on your rate, but £1,000 in set up costs is a lot to pay on a mortgage of £66,000. For example, on an interest-only basis, the new rate would save you £82 a month, so it will take one year of new monthly payments to earn the fee back.

Whether or not this will prove worthwhile also depends on how long this new deal lasts, as well as how long there is left on your mortgage overall.

Before making a decision, speak to a broker who specialises in commercial loans and get them to search the market for you as they may be able to find a scheme that is more suitable.

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