Resi lenders think twice about refinancing an Airbnb home

Short-term rental service is blurring line between primary, investment properties

TRD MIAMI /
Aug.August 30, 2016 08:45 AM

From the New York website: 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


Related Articles

arrow_forward_ios
Opera Tower (Wikipedia, Airbnb)

Opera Tower condo association sues Airbnb amid short-term rental crackdown

Opera Tower condo association sues Airbnb amid short-term rental crackdown
An illustration f Mayor of Miami Beach Dan Gelber (Credit: Nicholas Hunt/Getty Images)

Miami Beach to allow short-term rentals in condos, hotels

Miami Beach to allow short-term rentals in condos, hotels
The appeals court \rejected Miami Beach’s petition to overturn a ruling that determined that the city’s exorbitant fines for short-term rental violators ran afoul of state law (Airbnb, iStock)

Miami Beach racks up another court loss over short-term rental enforcement

Miami Beach racks up another court loss over short-term rental enforcement
Rafael Serrano and 3098 Alton Road

Appeals court rules Miami Beach cannot shut off water for nonpayment of short-term rental fines

Appeals court rules Miami Beach cannot shut off water for nonpayment of short-term rental fines
Miami Beach Mayor Dan Gelber (Credit: EVA MARIE UZCATEGUI/AFP via Getty Images)

Miami Beach shuts down short-term rentals due to coronavirus

Miami Beach shuts down short-term rentals due to coronavirus
Photo illustration of Ron DeSantis (Getty, iStock)

DeSantis announces $250M rental, mortgage assistance fund

DeSantis announces $250M rental, mortgage assistance fund
Gov. Ron DeSantis (Credit: Joe Raedle/Getty Images)

Florida extends freeze on evictions and foreclosures to July

Florida extends freeze on evictions and foreclosures to July
Governor Ron DeSantis (Credit: Eva Marie Uzcategui/Getty Images)

Florida governor extends freeze on evictions, foreclosures

Florida governor extends freeze on evictions, foreclosures
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...