Airbnb Hosts Can Now Use Rental Income to Help Refinance a Mortgage

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Though its effects on neighborhoods and real estate markets aren’t universally agreed upon, there’s no doubt that Airbnb has provided many a homeowner with an extra income stream. And if you’re a host who’s used those earnings to pay off some of your mortgage in the past, a new program is here to further sweeten the deal. Last week, Airbnb announced a partnership with Fannie Mae and three major lending institutions that will allow hosts to formally include the money they generate from rentals when applying to refinance their homes. According to an Airbnb blog post on the matter, the goal is to “unlock potential savings for hosts and help them reach their financial goals” by formalizing this revenue stream in the eyes of lenders, lowering their monthly mortgage payments in the process.

As part of the arrangement, Airbnb will furnish hosts who rent out their primary residence in the United States with a proof of income document, which can then be included in mortgage applications through Quicken Loans, Citizens Bank, or Better Mortgage. Fannie Mae will guarantee the mortgages, part of what Airbnb called the government-sponsored organization’s “work to find new, innovative ways to expand the availability of affordable mortgage credit” at a time when past notions of stable work have yielded to the vagaries of the so-called “gig economy.”

As Fannie Mae vice president of customer solutions Jonathan Lawless sees it, the partnership is simply an effort to keep up with the times. ”Rental income on your own home is something that ten years ago we almost never saw,” he told The Wall Street Journal last week. “The fact is that we’re seeing this much more commonly across the country.”

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It’s worth approaching the prospect of refinancing your home in this way with a degree of trepidation. Refinancing to take advantage of rising property values and “using your house as an ATM” was a major contributing factor to the financial collapse of 2008, as lenders overextended borrowing credit to homeowners based on unscrutinized sources of secondary income. Though Airbnb will be able to provide accurate income data directly to lenders, the capricious nature of the tourism industry—not to mention the threat of Airbnb bans in cities like Detroit and Baltimore—could potentially mean that one source of your home’s value is here today and gone tomorrow.

For now, it seems like the mortgage industry is cautiously optimistic. Fannie Mae is using the current three-lender program as a trial period, and has said that so long as things run smoothly it’s open to backing mortgages from other lenders who decide to go the Airbnb-income route. Though that won’t stop anyone who’s seen or read The Big Short from stuffing cash under their mattress, it’s encouraging to know that lenders are at least attempting to keep pace with the evolving nature of homeownership in these uncertain times.

Source: architecturaldigest.com