4 ways to finance a tiny home


Holly Johnson

Holly Johnson

Blog author Holly Johnson

Published December 29, 2017 | 3 min read

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Larger, upscale homes may have been all the rage before the Great Recession, but new attitudes about money and consumption have caused the pendulum to swing the other way. These days, tiny homes – homes in the 100 to 400 square foot range – are becoming increasingly popular.

Just like with buying any home, you'll need to figure out how you'll get the money to pay for it. To help, here are four ways to finance a tiny home.

Get a traditional mortgage

If your tiny home is a smaller version of a traditional home and built on a regular foundation, you may qualify for a traditional mortgage. Even though U.S. mortgage rates recently increased, they're still historically low right now.

You’ll need good credit, proof of income and money for a down payment to secure a mortgage. And traditional mortgages usually come with closing costs, so don't forget to factor that in. It's also worth noting that, if you're going the route of an extremely inexpensive tiny home, you may not qualify for a loan, as many mortgage lenders have minimum loan amounts.

Get an RV loan

RV loans are another financing option that can work for tiny homes, but only if your tiny home is mobile and on wheels. These loans typically last for 10 to 15 years and you choose a fixed interest rate and monthly payments. Interest rates tend to be higher for RV loans, but fees may be lower than what you’d pay for a traditional mortgage.

Take out a personal loan

A personal loan is an unsecured loan you can take out for any reason. Because tiny homes tend to be inexpensive, a personal loan could be enough to cover the costs.

Personal loans can be one of the easiest options because you can apply online and get funding with minimal fees (or even no fees) in around a week. Loan rates also tend to be fixed, which means your monthly payment will never change. However, like RV loans, interest rates for personal loans tend to be higher, but will vary depending on your credit score.

Want to know if a personal loan is worth it? Here's what you need to know before you borrow.

Apply for manufacturer financing

If you’re buying a tiny home directly from a manufacturer, make sure to explore manufacturer financing options. For example, Tumbleweed Tiny House Company, based in Colorado, connects buyers of its tiny homes to lender financing in-house. Down payments are high, however, starting at $13,000. Monthly payments start at around $447.

Before you apply for manufacturer financing, make sure you compare your options so you’re getting the best interest rate and loan terms.

Preparing to move to a tiny home

If you’re gearing up to downsize into a tiny home, financing your new property is only part of the equation. You may need to buy a physical plot of land to put the home on. You’ll also need to line up tiny home insurance to ensure your home and its contents are properly covered.

Make sure you’re truly ready for this sweeping lifestyle change before you dive in. Saying you’re going tiny is one thing, but actually living in a home the size of a large living room may not be as fun and carefree as you think. Start by renting a tiny home for a short period at first so you can see if it's for you.

Image: fizkes