Hosting Through Airbnb May Make it Hard to Refinance Your Loans

For cash-strapped homeowners, supplementing their income by renting out spare rooms through Airbnb may sound like an appealing prospect. But this decision may come back to haunt them when it comes time to refinance their loans. According to The Wall Street Journal, banks are starting to view applicants who use the rental service to host with a critical eye.

Banks like Wells Fargo and Bank of America have been known to raise mortgage rates or deny certain loans altogether based on a borrower’s history with Airbnb. Many homeowners are unaware of the issue until it comes time to refinance their loans. They go in expecting any income they’ve made through hosting to boost their credit profile and improve their interest rate. Instead, it often results in the opposite.

When a bank sees that a home is bringing in extra cash, that gives them reason to label it as an investment property. Such properties are notoriously harder to finance than residential homes because investment property owners have a greater tendency to default on their loans. Airbnb complicates this distinction because many of the hosts are renting out rooms from their full-time residences.

Whether banks like it or not, Airbnb and similar rental services don’t seem to be going away anytime soon. Between 2010 and 2015, Airbnb’s summer reach multiplied by an impressive 353 times. But until more banks warm up to the idea, it may be wise for homeowners to leave their guest rooms closed for business.

[h/t The Wall Street Journal]

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