For the first time, Airbnb hosts can now count their home-sharing earnings as additional income when refinancing their mortgage at three national lenders: Citizens Bank, Better Mortgage, and Quicken Loans (the company behind that Rocket Mortgage app you see each Super Bowl).
That may sound trivial, but like Ron Burgundy, it’s kind of a big deal. Refinancing a mortgage isn’t exactly easy; it’s almost as tedious as taking one out in the first place. And even if you have considerable equity in your home (whether because you’ve paid down the principal or home values have increased), lenders still want to see proof that you can keep repaying the loan.
Now, with the blessing of mortgage giant Fannie Mae, some lenders are willing to view the money you made letting strangers stay in your home for the weekend as part of that proof.
And that’s not chump change: Airbnb is the most lucrative sharing economy side hustle by far, with hosts averaging more than $900 a month. For a household earning $60,000 a year, adding $11,000 in Airbnb income — an 18% boost – can make a big difference on a refinance application.
It’s unclear how big an effect this will have in practice, at least in the short term: Mortgage interest rates have risen sharply in recent weeks, which makes refinancing a lot less appealing. But it could help homeowners unable to refinance out of a higher-interest or adjustable-rate mortgage because their regular income had taken a hit.
And it could be the first symbolic step toward a larger long-term goal.
Airbnb is a wildly successful global Goliath, but still operates in a legal gray area in many places — so the company craves legitimacy. Under fire for pushing up housing prices (however slightly) and undercutting the hotel industry, Airbnb has supported some state and local efforts to subject hosts to room occupancy taxes and other regulations — all in hopes of escaping its legal limbo and gaining sanctioned status.
This move establishes home-sharing as a bona fide, lender-approved income source. And that could perhaps pave the way, eventually, for some first-time homebuyers to include estimated Airbnb income on their mortgage applications.
Just as buyers of a multi-family home are permitted to factor in up to 75% of the expected market-rate rents, maybe one day experienced Airbnb hosts with a credible plan to rent out an extra bedroom could count some of those anticipated earnings, tipping their debt-to-income ratio in the right direction when student loan debt might otherwise threaten to torpedo their application.