The hostel Lotte in Heidelberg is situated in an old house in the old town with fantastic stylistic individual interior design. It is very close to the castle (5 minutes of walk). And also the other sights of Heidelberg are very easily reachable on foot.
To the area where you will find a lot of pubs and bars (Untere Straße) you will need only 5 minutes.
Very warm and personal atmosphere in the hostel. Definitely one of my favourite hostels in Europe.