Hi, I'm ARLO and I Love Questions!
My mom has a house with a reverse mortgage, and she has an in-law apartment attached to her house – a separate door to the apartment and a firewall door between the apartment and her house. She has rented the apartment in the past (before Reverse Mortgage) to various people during the summer. She still lives in her part of the house. She is getting older, so using Airbnb to rent a separate apartment would be a lot easier. I have seen questions about the transient rental of a single unit but could not tell if that is not Airbnb related to renting a unit where the owner is away temporarily or if it applies to this situation. Thanks!
By Kate on 01.04.2019Hello Kate,
HUD has strict guidelines regarding rental income on properties with a reverse mortgage, and short-term or transient rentals (less than 30 days) are not permitted.
What Rental Income Does HUD Allow?
When HUD introduced Financial Assessment guidelines on November 10, 2014, they began allowing boarder income under the following conditions:
- The renter must have lived in the home for at least two years.
- The rental income must be reported on the borrower’s tax returns.
If your mother rents the in-law apartment to a long-term tenant (with a formal lease agreement), this could be acceptable under HUD’s rules.
Why Airbnb & Short-Term Rentals Are Not Allowed
HUD does not allow transient income, which is defined as rental income from guests staying less than 30 days.
- Short-term rentals (such as those from Airbnb, VRBO, or similar platforms) are classified as business income—not boarder income.
- Renting out any part of the home on a transient basis is considered commercial use, which violates HUD’s reverse mortgage occupancy rules.
- Properties used for business purposes (like running a hostel or hotel) are not eligible for HUD mortgage insurance.
What Are the Alternatives?
If your mother wants to rent the apartment, she must:
✔ Rent to a long-term tenant with a formal lease of 30+ days.
✔ Report rental income on her tax returns for at least two years.
✔ Avoid short-term rentals to ensure the home remains HUD-compliant.
If your mother has already listed the unit for short-term rentals, she should remove it to avoid potential issues with her reverse mortgage lender.
Bottom Line
- Airbnb and short-term rentals (less than 30 days) are not allowed under HUD’s reverse mortgage rules.
- Long-term rentals (30+ days) with documented income may be permitted.
- Renting out part of the home on a transient basis could jeopardize the loan.
If in doubt, consult the lender to ensure compliance with HUD guidelines.
161 people have given this answer a thumbs up
