In addition to new government regulations, angry neighbors and the occasional orgy, hosts who rent their homes out on websites like Airbnb have something new to worry about. Lenders may be skittish about providing a mortgage or refinancing a home that produces short-term rental income from such companies.
Traditionally, lenders have been clear on classifying loans for either principal residences or investment properties. But in the age of Airbnb, the line is becoming blurred, the Wall Street Journal reported.
“This is kind of novel,” said Jeffrey Naimon, a consumer finance attorney and partner at law firm BuckleySandler LLP. “I don’t think the market has gotten its arms around it.”
Some borrowers have been reporting income from websites like Airbnb and HomeAway when applying for a new loan in hopes of raising their credit profile and get a better interest rate. Instead the banks, which typically find investment properties to be riskier, have been telling borrowers they either no longer qualify for certain kinds of loans or will have to pay higher interest rates.
A spokesperson for Airbnb said in an email that incidents like these are “incredibly rare.”
A few years ago, similar questions arose about whether traditional insurance policies would apply to a homeowner’s Airbnb activity. The startup reacted by offering hosts free, primary liability coverage of up to $1 million per incident.
When it comes to mortgage refinancing, standards will probably become clearer the more experience lenders have with Airbnb hosts.
“Some of the programs that are new that allow people to rent out their properties short term or in different ways that may not have existed 10 years ago may not be fully understood by every lender across America,” said Greg Gwizdz, a national sales manager for Wells Fargo’s mortgage division. [WSJ] — Rich Bockmann