Second-home owners who want to rent out their properties will breath a sigh of relief, and perhaps make a bit of cash.
A newly rewritten document from Fannie Mae suggests homeowners and lenders may have been misinterpreting rules around rentals of second homes since 2001.
Fannie Mae’s April 3 clarification of the “Second-Home Rider” shows that homeowners are allowed to rent out a second home after one year of ownership, and that short-term renting during the first year is also permitted under specific conditions, the Wall Street Journal reported.
Previously, the rider had been interpreted by many owners and lenders as saying that second-home owners with mortgages backed by Fannie Mae or Freddie Mac were completely prohibited from renting their properties. It read: “Borrower shall occupy, and shall only use, the Property as Borrower’s second home.”
A Fannie Mae spokesperson told the Wall Street Journal that the rules had not changed, but that the rewrite was triggered by calls from lenders wondering whether borrowers could use short-term rental services like Airbnb.
The new rider states: “Borrower will maintain exclusive control over the occupancy of the Property, including short-term rentals.” While owners are still barred from turning second-homes over to management companies or timeshare arrangements, the rewording makes it clear that after the first year, and owner can explore these and other short-term rental options.
Before this clarification, some borrowers and lenders believed that in order to rent out a second-home, they would need to take out “investment mortgages,” with higher rates. [WSJ] – Decca Muldowney