Gig Economy Income To Count For Remortgages

Airbnb Hosts to get Help to Lower their Mortgage Rate

If your side-gig is to rent out your property on Airbnb, the money earned as income for a year or longer will be counted when it comes to refinancing your home.

In the US, the Federal National Mortgage Association known as Fannie Mae, has announced a partnership with three major American lenders, Quicken Loans, Citizens Bank and Better Mortgage, to offer Airbnb hosts a new way to remortgage their home.

The program will let anyone who’s rented out property on Airbnb for a year or longer count some or all of that money as income.

John McHugh, CEO of GIGLY, said

“This is big news for hosts generating income from Airbnb, and we’d like to see the UK follow suit. Currently being an AirBnB host is still fairly taboo in the eyes of UK lenders, unless you reside in the property with your AirBnB guests. Clearly this doesn’t suit all scenarios. Giggers who are generating income from their property asset need more innovative products from their lenders. If a homeowner has sufficient insurance why shouldn’t they be allowed to generate income from their property on a short term basis with AirBnB?

In the UK, people looking to become a host may find they are in breach of the mortgage lenders. In August 2017, asked high street banks whether listing a property with a residential mortgage would be a breach of their mortgage terms and condition. Royal Bank of Scotland, Nationwide, Santander, Lloyds and Nationwide had varying responses; from the need to apply for consent to let, which would include paying a fee right through to a straight forward no from Nationwide if the property is the owners only residence.

To give UK lenders credit, we have been pleasantly surprised by some new products that have launched in the last 12 months, which have allowed giggers to secure a mortgage based on their contract status.

Coverage of the Airbnb & US lenders partnership

The Wall Street Journal explained that “Homeowners soon will be able to count income they earn from Airbnb Inc. rentals on applications for refinance loans”. Amazing! Airbnb hosts work hard, and so while cash flow can be sporadic, we think it should register as part of your income when remortgaging. Using your Airbnb income sounds easy enough to do, with CNET stating that you just need to “include ‘Airbnb proof of income’ in [your] application”.

Airbnb explained that they’ve had to battle to get some lenders on board: “Financial institutions haven’t always understood home sharing and how it’s an economic lifeline for many families and individuals. That’s one of the reasons why many lenders didn’t recognize Airbnb income when people applied to refinance their home loan.”

This was also touched upon by Housing Wire. They expanded, saying “Many continue to question Airbnb, saying it could be disrupting the housing market. […] The prospect of being able to rent homes out as short-term rentals keeps homeowners from putting their home on the market.” They agree that this move is significant, as “under this new partnership, the housing industry would be working together with Airbnb to benefit homeowners looking to refinance their home.” We think that’s a big step in the right direction.

Airbnb also highlighted the benefits for hosts, claiming that “this could help unlock potential savings for hosts and help them reach their financial goals”. They themselves will be hoping for a jump in host sign ups, and the three lenders should see more applications for mortgage refinance. Everybody wins.

Airbnb’s co-founder and chief strategy officer, Nathan Blecharczyk, emphasised the importance of the short term letting company for families: “Today, some of the nation’s largest financial institutions understand that Airbnb is an economic empowerment tool that can generate important income for families, and they are working to recognize this.”

The initiative is also causing excitement among the lenders. Housing Wire caught up with Quicken Loans CEO, Jay Farner. He explained his company’s motivation for partnering with Airbnb: “Technology is at the heart of everything we do at Quicken Loans, so it is a natural fit for us to partner with one of Silicon Valley’s most innovative companies”, and added “Airbnb and Quicken Loans are firmly aligned to drive innovation in the real estate industry to dramatically improve and simplify client experience, as well as saving homeowners time and money.”

Better Mortgage CEO, Vishal Garg, shared that opinion. Speaking to Housing Wire, he commented that “We are proud to be working with Airbnb and Fannie Mae to make it easier for Airbnb hosts to reinvest in their most important economic asset, their home.”

We want in on the action

Giggers need UK lenders to be more agile and innovative

We’re very excited about this announcement. We know how hard gig economy workers of all types and industries work. This initiative makes remortgaging easier, quicker, and most of all cheaper for them.

Given the news of impending interest rate rises, this sort of helping hand when remortgaging could be extremely useful to UK giggers very soon! So really, there’s only one question – how long until we can do this in the UK?!
Picture credit: Patrick Perkins on Unsplash