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happykeeper's picture
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Aloha Innkeepers

I have been looking into the challenges bed and breakfasts face in refinancing. I have been to a couple of sites of folks who highlight bed and breakfasts and get the impression that the options are limited. Does anyone have a site where one could find out more about the possible options. Would anyone care to share their experiences. I am interested in understanding the differences between commercial financing options and how that impacts insurance and taxes. Any leads on websites, threads, or books would be appreciated.

Mahalo

kenny

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We are about to re-finance our B N B. One bank said that we would have to go residential because we live there. The other bank said it is a commercial loan because I am using the income from it to show the refi works financially. The latter bank does not sell the note in the secondary market.

1. If it is residential, will the bank sell the paper? Does that mean more strict underwriting guidelines?

2. Does anyone know a mortgage broker who understands the business and can refinance an existing business?

Morticia's picture
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05/22/2008

Local bank maybe? What kind of loan do you have now - residential or commercial? Be sure you understand the different pay back requirements of each kind of loan. You may get better rates on one type over there other. 

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rrh
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5% on a commercial? Wow, wish we were in your neck of the woods!

Morticia's picture
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rrh wrote:

5% on a commercial? Wow, wish we were in your neck of the woods!

WSJ prime + 1%, that's the rate we got when we first applied. Now the WSJ prime has dropped quite a bit.

rrh
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We closed on our commercial loan Friday at 7.1%. We have dilegently kept our credit history in good shape and presented a good business plan and had no problem getting money. We had to call several local lenders before we found one looking to fund our type of (ad)venture.

Morticia's picture
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rrh wrote:

We closed on our commercial loan Friday at 7.1%. We have dilegently kept our credit history in good shape and presented a good business plan and had no problem getting money. We had to call several local lenders before we found one looking to fund our type of (ad)venture.

We're looking at 5% in the coming weeks. Just need to wait until after Christmas so the banker is back.

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06/24/2008

I agree with muirford, local banks are much easier to deal with and according to my Financial advisor son, are much more willing to loan.  We used a local a year ago and I could not believe the amount of loan we were approved for - much, much more than what we had applied for.  They told use it would be easy to get additional money if we needed due to the pre-approved amount.

Good luck.... 

happykeeper's picture
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Thanks for the great thoughts. It may be that we are at that point where we will need to move into a commercial loan. Since it is a refi of our existing residential loan, we will be using our strong equity position to make it an attractive loan. Giving up the really great interest rate makes it a little tougher, but has some long term benefits, like a better insurance fit and more flexibility to expand our plans.

 

Morticia's picture
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knkbnb wrote:

Thanks for the great thoughts. It may be that we are at that point where we will need to move into a commercial loan. Since it is a refi of our existing residential loan, we will be using our strong equity position to make it an attractive loan. Giving up the really great interest rate makes it a little tougher, but has some long term benefits, like a better insurance fit and more flexibility to expand our plans.

 

Check around...unless the loan you have now is under 6%, you may surprised what a commercial loan is going for now...

muirford's picture
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I would check with local banks first, for commercial financing.  Our two local banks both have money to lend - no subprime mortgages or bad paper - and know the local businesses very well if you are buying an established B&B.  If you have good credit and 30% down and are buying a viable business, I don't think it is really that hard. 

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There are no rules, just follow your heart. ~ Robin Williams

 

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06/24/2008

Conventional Mortgage Companies will shy away from a loan where the owner has a home based business.  Usually noticed if you use the income from the B&B as all or part in your loan papers and with your added liability insurance policys.  We have a commercial loan as well, changed over when we refinanced several years ago.  It was an easier process than I thought and although the interest rate was a little higher than the conventional Mortgages were, it was less than our previous rate.  Times are tougher these days though.  Get all the facts and read completely.

Morticia's picture
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05/22/2008

Did you mean 'in re' financing or 'refinancing'?

We have a commercial loan. Depending on how much you need to borrow, you may be able to get a conventional loan. If you can pay the loan with an outside job, then traditional loans work. If the business will finance the loan, you'll need a commercial loan. (From what I have understood.)

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