What’s short-term rental income? It’s the real estate term that stands for money you earn from renting your home out for a day, week, or month at a time. If you’ve got a property with a stand-alone unit like a “granny flat” or ADU (additional dwelling unit), you could rent it for short periods of time. Other people might travel for part of the year, and rent their home out for the months that they’re gone.
Any of these circumstances can qualify as short-term rental income. With the rise of businesses like VRBO, AirBnB, and HomeAway, you’ve got more opportunity than ever before to make money through short-term rental income. However, it didn’t always allow you to qualify for a mortgage refinance, because short-term rental services don’t offer a lease agreement.
How have rules and lenders changed their view of short-term rental income and mortgage refinancing?
Mortgage lenders are catching up with the short-term rental business, and the majority of them will now consider income from your vacation rental property when you’re applying for a mortgage refinance. This wasn’t always true: up until 2019, some lenders didn’t accept short term rental income to qualify for refinance loans because there wasn’t a lease agreement. Now that short-term rentals are more common, you can use several ways to prove you receive rental income from part of your property or part of the year for a single-family home.
AirBnB partnered with several major mortgage finance lenders in 2019 to allow hosts to use the income they get from a room in their house or a separate dwelling unit to apply for a mortgage refinance. VRBO, another platform, has also partnered with mortgage lenders to allow their records to document short-term rental income.
In the past, only traditional rental properties like separate investment homes, could be used as income to apply for mortgage refinancing, primarily because signed lease agreements were required.
Not every mortgage lender will accept short-term rental income as part of the qualification process for a 30-year fixed rate, 15-year fixed rate mortgage refinance, whether it’s a cash out refinance, a home equity line of credit (HELOC) or another type of refinanced mortgage loan. This is yet another reason why, if you use short-term rental income to pay all or part of your mortgage each month and are considering refinancing, you can benefit from working with an experienced mortgage professional.