Bank giants like Bank of America Corp. and Wells Fargo & Co. reportedly are subjecting borrowers who rent rooms to additional scrutiny when owners try to refinance. Some borrowers are finding they aren’t eligible for certain types of loans or they will have to pay higher interest rates, according to a WSJ article.
For some home owners, they may have assumed the extra income they’re generating from renting out rooms would help them when refinancing. After all, one owner in Seattle says he earned about $30,000 last year from renting out a cottage in his backyard. He thought that extra income would help him when he applied to refinance a home equity line of credit at Bank of America. Instead, he was denied by the bank because he was operating his home as a business. Bank of America says it does not offer home equity lines of credit on investment properties.
Lenders say such room-rental services are blurring the lines between residential and commercial properties and making it much more difficult to classify a home. Lenders typically maintain tighter underwriting standards, such as requiring larger down payments and higher rates, for investment or second home properties.
Online rental services have been seeing rapid growth over the past year. Airbnb’s website had 455,223 active listings as of July, an 80 percent increase from a year prior, according to YipitData research.
SOURCE: DAILY REAL ESTATE NEWS
Any questions or comments, feel free to contact James Y. Kuang at (626) 371-5662 or by email: james.kuang@coldwellbanker.com
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