AirBnB Refinance | Short Term Rental Property Mortgage Approval

Getting an AirBnb refinance completed on an investment property can be surprisingly challenging for investors. Well, that is depending on what lender(s) you talk with about it.

If you’re a real estate investor looking to do a refinance on an AirBnB, VRBO, or Homeaway property, this will be the information you’ve been looking for.

Below we’ll cover exactly what you need to know and how to get approved.

AirBnB Refinance Challenges

Lenders hate uncertainty.

Lenders want to see consistency and stability.

For that reason, relying on short-term rental income makes lenders nervous. Even if there is a strong history of rent received.

Per conventional guidelines (fannie mae and freddie mac), short-term rental income can only be used to qualify on a primary residence or second home.

Wait, what? So hang on… let me understand…

If I own a rental property, and it’s 100% for short term rentals… I can’t use that income to qualify?

Well, on a conventional loan, the answer is: No, you can’t use that income to qualify if it’s an investment property.

Doesn’t make sense right?

I agree.

Especially if you can show strong history (12 months) of rents received on AirBnB, VRBO, or Homeaway.

The good news is that there are lenders who agree that the income should be usable. For this situation it has to be done on a non-QM mortgage.

How to Get Approved for an AirBnB Refinance

Since the whole short-term real estate rental business has taken off in recent years, lenders have not been very excited about it.

Until recently, a short-term rental refinance has been nearly impossible to complete on an investment property if you needed the short-term rental income to qualify.

In order to be able to use the rental income received to qualify on an investment vacation rental, you need to work with a lender that allows these on their non-QM product line.

These are extremely uncommon. Most loan officers don’t want to talk about it because they haven’t coached themselves up on this yet. Some (many) loan officers will even tell you this is impossible, simply because their company doesn’t offer it as an option.

Here are the requirements:

What you can expect to get approved for an AirBnB refinance on an investment property:

Will need to be able to show at least 12 months rental history from the source of income on subject property from AirBnB, VRBO, or Homeaway.
Minimum credit score is 600
Maximum loan to value ratio on rate and term refinance is 80%
Maximum loan to value ratio on cash out refinance is 75%
Minimum loan amount is 100K
Available on 1-4 unit properties, as well as condos. Non-warrantable condos considered on case-by-case.
May require proof of reserves
A 1007 rent schedule is ordered with the appraisal to determine the “fair market rent”. Property needs to be performing 25% better than fair market long term rentals.

In most vacation areas it is typical for full time vacation (short term) rentals to substantially outperform long term leases. So performing 25% better than long term rentals is not difficult to accomplish in most areas.

Example:

If fair market rent for long term rental properties is $1,000/month, then the property needs to show income of $1,250/month on average.

In addition, the new mortgage payment (including taxes/insurance/HOA dues) cannot exceed the average gross monthly property income.

Example:

If the average monthly income is $1,250, the new mortgage payment with taxes/insurance/HOA dues can’t exceed $1,250.

Other Advantages of Short-Term Rental Refinance

Besides being able to accomplish your refinance goals with this product, there are a few other benefits worth mentioning:

No max number of financed properties. Great for investors who run into the max number of financed properties with other lenders
Hold title in LLC. The borrower(s) on the loan application must be the same as the managing member and have documented authority to sign on behalf of the entity
No personal income required on the loan app. Tax returns, pay stubs, W-2s – all not required.
Loan approval is based on credit, equity, and property cash flow

Scenarios that would Not be Eligible for AirBnB Refinance

Although there are some really unique opportunities to take advantage of with the short-term rental refinance, there are some things that would make the transaction ineligible.

Here are some things that would be a problem:

Unique property types like: condotels, co-op, manufactured/modular home, working farms, vacant land, properties with hotel like amenities, houseboats, timeshares, etc.
Multiple late housing payments in the most recent 12 months
Bankruptcy within the last 2 years
Foreclosure within the last 3 years
Borrowers who are: US Visa Student, non-permanent resident aliens, foreign nationals, land trust, corporations and partnerships, nominee or land trusts

In Summary

Getting approved for an AirBnB refinance can be a challenge with some lenders, but it’s definitely possible if you can show the property pays for itself over the last 12 months.

If you’re an investor, and you’ve been told you don’t qualify for a refinance on your short-term rental property I invite you to reach out.