Financing for a short term rental condo on a resort

[Joanne Hanson]

We’ve found a great deal on a 3 bed 2 bath detached cabin at a ski/golf resort in Minnesota. We’d like to buy it as a vacation home for ourselves and rent it out as a short term vacation rental throughout the year. I’ve been trying to get $100k mortgage for it and keep getting told that it’s not mortgagable as it’s a condo on a resort. None of the major banks seem to want to touch it, and the non conventional private lenders I’ve tried aren’t lending on this type of property in Minnesota either. I know this deal will give a great cashflow with how we’d manage it, so I don’t want to pass it up because of financing. Has anyone else had any experience with condos on resorts? Or condotels as someone are classed? How do you find out the exact classification? As people keep telling me different things. Thanks!!

[Nancy Bachety]

It's non-warrantable. 

Non-warrantable features for conventional loans

Common non-warrantable properties include condotels, timeshares, fractional ownership properties, multi-unit condos (the condo unit itself is two units), condos in a permanent care/assistance residence, and other projects which require owners to join an organization, such as a golf club.

Manufactured housing projects and other developments which are not legally considered real estate are also excluded from warrantability. These include houseboat and motorhome projects.

A condo in monetary litigation will likely be disqualified from financing by the major agencies.

When buying a condo, ask your real estate agent or lender about the building’s warrantability before you go any further.

A warrantable condo typically gets you lower mortgage rates than a non-warrantable condo. Warrantable condos create lower risk for the bank.