Couple meeting airbnb host
vgajic/Getty Images

Looking to refinance your mortgage? It might be time to put that empty bedroom to work.

In a new agreement between Airbnb, Fannie Mae and three private lenders, individuals who rent out their homes through the home-sharing platform can count that income when applying for a refinance.

“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,” says Nathan Blecharczyk, Airbnb co-founder and chief strategy officer.

Better Mortgage, Citizens Bank and Quicken Loans have agreed to consider Airbnb rental income as part of an applicant’s overall earnings.

“Our industry has been pretty resistant to change for a long time,” says Bob Walters, president and chief operating officer of Quicken Loans. “To innovate as the economy innovates is something we thought about for a long time.”

Why is this a big deal?

Before this partnership, income reported from short-term home rentals wasn’t typically considered by banks to be a part of someone’s total financial picture.

For someone who relies on rental income to supplement their salary, recognizing these earnings could make the difference between qualifying for a new mortgage and getting turned down.

“It is going to unlock significantly better terms in financing to a large amount of people,” says Emanuel Santa-Donato, director of Capital Markets at Better Mortgage.

What to consider before you refi

Although the initiative is a great first step toward recognizing the changing ways people earn money in the gig economy, there are some limitations.

First, keep in mind that you have to have been renting out space in your home via Airbnb. If you’ve been accepting cash or checks from a renter, you can’t backtrack and say you want that income to count.

Also note that this arrangement applies only for refinancing a mortgage, and only if you’re refinancing through one of the companies in the partnership. You can try your hand at refinancing with another company, but they may not count your Airbnb income.

If you fall into a category that could benefit from this arrangement, make sure you’re looking to refinance for the right reasons.

“Just because you can borrow money doesn’t mean you should,” says Tim Steffen, CPA, CFP professional and director of Advanced Planning for Baird, an investment firm in Milwaukee. “What are you using the loan proceeds for?”

If this change is going to help you qualify for a refinance, and you’re going to end up with a lower interest rate on your mortgage, that’s a good thing, Steffens says. But if you’re looking to just take cash out, it could be a poor financial move if you don’t use that money wisely.