Back when it was founded in 2008, a lot of people were deeply sceptical about the idea of Airbnb. The idea of opening up your home to a complete stranger scared away a lot of early investors. The idea of leasing a room in your home is an old one, but to let someone effectively borrow your home was never really seen before on such a large scale.
Now, eight years later, the company is one of the largest independent rental businesses in the world. Across the globe 60 million users have the choice of staying with 640,000 hosts. The business is growing every day as people find that it’s a great way of supplementing an existing income. Airbnb offers you as a property owner, the option of converting unused space in your home to sources of income. But how does toeing this line affect your mortgage or insurance?
If you let out your property without consent on Airbnb, you will be breaching the terms of contract for many mortgage providers. There is usually a clause included in the fine print aimed at prohibiting the letting of the property on any basis.
In fact, many providers will not give consent even if you are only letting your property for a few weeks whilst you are out on holidays. Amongst the few providers that will offer consent in such a scenario, many charge fees up to £300 for the consent period. Some providers will give consent for your property to be used in Airbnb hosting for no more than 24 weeks a year. However, this comes with a variable rate 2 percentage points higher than the standard or best buy offers in the market.
What if you are letting just a room in your property? The waters get even murkier as different lenders have different rules for this. Some will allow this on a bed and breakfast basis whilst others still charge a consent fee.
The bottom line, therefore, is to find out ahead of time the specifics from your mortgage provider. Claiming ignorance of the provisions of the mortgage contract will not exempt you from penalties and in worst case scenarios, repossession.
Most insurance companies generally will not provide home insurance for Airbnb hosts. This is because as standard, home insurance policies are offered to cover the policy holders and their families. Lodged guests are not factored in because there is no yardstick for determining how the habits or lifestyle of the lodger will impact the property and the occupants.
However, some insurance providers offer Airbnb cover with home insurance policy variants. Landlord insurance is one such example. Other providers will also provide Airbnb hosting cover if the policyholder agrees to slight mark-up in rates/premiums.
In summary, you need to speak extensively with your mortgage and insurance providers if you want to be an Airbnb host. Weigh options provided and compare rates across providers where available. Do not make the mistake of ignoring the right home insurance with the hopes that the Airbnb “Host Guarantee” will cover all damages. You could end up in a dilemma such as this.