Hotel and Apartment Building Financing: Traditional Lenders vs. Alternative Funding Sources

A hotel or apartment building can be financed by several kinds of lender: banks and credit unions, life insurance companies, lenders that package loans into commercial mortgage-backed securities (CMBS), government-backed programs, and private or “alternative” lenders. They differ on what they charge, how much they lend, how fast they move and how much they bend for an unusual property or borrower.

This guide is for owners and buyers shopping for a loan. It explains who each lender is, where each one fits and how to choose. The right answer depends mostly on the property: a stabilized apartment building has more options, at lower cost, than a hotel in transition. This is general information, not financial advice.

Who holds commercial mortgages

U.S. data show how the market is divided. At the end of the second quarter of 2026, according to the Mortgage Bankers Association’s quarterly report, commercial and multifamily mortgage debt outstanding was about $5.1 trillion.[1]

Share of U.S. commercial and multifamily mortgage debt by holder, Q2 2026

Show the data as a table

Category	Value
Commercial banks	38%
Agency and GSE portfolios and MBS	22%
Life insurance companies	15%
CMBS, CDO and other ABS	13%

Comparable Canadian figures by lender type are not published in the same way. In Canada, banks, credit unions, insurance companies and CMHC-insured lending play the same roles, and CMHC insurance makes the apartment market heavily bank-and-insurer driven.

The lenders, side by side

How the main lender types usually compare

Lender	Cost	Leverage	Speed	Flexibility	Best for
Banks and credit unions	Low to moderate	Moderate	Moderate	Moderate; relationship-driven, often with personal guarantees	Owners with strong financials and a banking relationship; construction loans
Government-backed (CMHC, HUD, Fannie Mae, Freddie Mac)	Lowest	Highest for apartments	Slow	Low; strict program rules	Stabilized or new rental apartments
Life insurance companies	Low	Lower	Moderate	Low; prefer high-quality, stabilized assets	Large, low-leverage loans on strong properties
CMBS (conduit) lenders	Moderate	Moderate to high	Moderate	Low after closing; loans are serviced under a trust	Stabilized hotels and commercial property, non-recourse borrowers
Debt funds and bridge lenders	Higher	High	Fast	High	Transitional properties, lease-up, repositioning
Private and hard-money lenders, mortgage investment corporations	Highest	Based on property value	Fastest	Highest	Short-term needs, problem properties, credit issues

Banks and credit unions

Banks are the default lender for most owners. They lend from their own balance sheet, so they can be flexible on structure, but they expect a relationship, deposits and often a personal guarantee. U.S. banks follow supervisory loan-to-value limits: 80% for commercial and multifamily construction loans and 85% for improved property, with internal limits often lower.[2] Credit unions work in a similar way, usually on smaller, local loans.

Government-backed and agency lending

For apartment buildings, government-backed debt is usually the cheapest and highest-leverage option. In Canada, CMHC’s MLI Select insurance allows up to 85% loan-to-value on existing buildings at the 50-point level and up to 95% at higher levels, with amortizations of up to 40 to 50 years.[3] In the U.S., Fannie Mae’s standard conventional loan offers up to 80% loan-to-value, a 1.25x minimum debt service coverage and terms of 5 to 30 years, and requires the property to be stabilized.[4] Hotels are generally not eligible for these residential programs.

Life insurance companies

Insurers lend long-term money to match their long-term liabilities. They tend to choose the best-located, best-leased properties and lend conservatively, and in return they offer low rates. They are a good fit for a well-performing apartment building or a strong hotel with modest leverage.

CMBS lenders

A CMBS lender makes a loan, then sells it into a pool that backs bonds sold to investors. Loans are usually non-recourse apart from standard carve-outs, but after closing they are handled by a servicer under the trust documents, which makes changes and early repayment harder.

Private, bridge and hard-money lenders

Alternative lenders include debt funds, private lenders, family offices and, in Canada, mortgage investment corporations (MICs). A MIC is a corporation that meets the tests in section 130.1 of the Income Tax Act; it can deduct the dividends it pays, so its mortgage income flows through to its shareholders.[5] These lenders lend mainly on the value and story of the property, close quickly and accept situations banks will not: a hotel mid-renovation, a building with high vacancy, a borrower with a credit problem. They charge for it with higher rates and fees and shorter terms. Read more in bridge loans for commercial real estate and creative financing for distressed property owners.

UBU Financial is itself a private lender and loan originator for projects that do not fit traditional lending criteria.

Why hotels and apartments are treated differently

How lenders see the two property types

Apartment buildings

• Leases of a year or so make income relatively stable
• Eligible for CMHC, HUD and agency programs with high leverage and long amortization
• Many lenders compete for the business

Hotels

• Rooms are re-let every night, so income moves with the economy
• Income depends on the operator and often a brand franchise
• Lenders typically ask for lower leverage and higher debt coverage
• Not eligible for the residential insurance and agency programs, so fewer lenders compete

How to choose a lender

Picking the right lender for your property

1. Start with the property’s condition

   Stabilized properties qualify for the cheapest debt. If yours is in lease-up, under renovation or underperforming, plan for a bridge or private loan first and a permanent loan later.

2. Decide what matters most

   Lowest rate, highest leverage, speed, prepayment flexibility or non-recourse terms. You rarely get all of them from one lender.

3. Compare the full cost

   Rate, lender and broker fees, legal and third-party report costs, reserves, and the cost of repaying early.

4. Read the recourse terms

   Know whether you are signing a personal guarantee and what would trigger it. Our article on recourse and non-recourse loans explains the difference.

5. Ask for a term sheet from more than one lender

   A broker or originator can widen the field, especially for hotels and unusual properties.

Before signing, read recourse vs non-recourse loans and commercial mortgage options for the terms that matter beyond the rate.

Sources

1. Outstanding U.S. CRE Mortgage Debt Rises to $5.1 Trillion (reporting the MBA Commercial/Multifamily Mortgage Debt Outstanding report for Q2 2026) — Connect CRE, September 29, 2026. Checked 2026-10-12.
2. Interagency Guidelines for Real Estate Lending Policies (12 CFR Appendix C to Subpart K of Part 208) — Legal Information Institute, Cornell Law School (text of the U.S. regulation). Checked 2026-10-12.
3. MLI Select — Canada Mortgage and Housing Corporation. Checked 2026-10-12.
4. Multifamily Term Sheet: Conventional Properties — Fannie Mae, 2026. Checked 2026-10-12.
5. Income Tax Act, section 130.1 (mortgage investment corporations) — Justice Laws Website, Government of Canada. Checked 2026-10-12.