Small house, big cost: How to finance a tiny house

By Susan Shain

The next time you’re overwhelmed by the sheer amount of stuff in your home, you might wonder: Maybe I should just give it all up and buy a tiny house.

At least, that’s what I do. The romantic vision of rolling around the country in my very own 400-square-feet of cozy seems really appealing.

If you feel the same, you’re probably wondering whether you could afford to become part of the tiny house movement. While downsizing may seem easy, it takes a lot of research to survive in these eco-friendly dwellings. For example, how much do tiny houses cost? Is financing available?

Here’s the low-down on these humble abodes.

How Much Do Tiny Houses Cost?

As with any living space, the cost of a tiny house greatly depends on what you want.

If you’re handy and want to DIY, it could cost you around $23,000, says this infographic from The Tiny Life.

A contractor-built tiny house could range from $10,000 to $80,000, and costs $35,000 on average, according to the Tiny House Blog.

That’s definitely not cheap, but it’s far less expensive than a typical American home, which has a median price of $188,100.

Can You Finance a Tiny House?

I’m going to assume you don’t have tens of thousands of dollars sitting in your bank account right now.

So, can you finance a tiny house? Though it’s not as a straightforward as getting a mortgage, there are options.

1. RV Loan

I don’t know about you, but tiny houses appeal to me because of their mobility. If you, too, want to put your tiny house on wheels, it might qualify for a RV loan.

This type of loan currently has “rates between 5% and 6% for seven years,  sometimes more, after a 10% down payment,” says Bankrate.

Certain manufacturers certify their tiny houses as RVs, so all of their products qualify for these loans.

One such company is Tumbleweed. Check out its gorgeous Elm RV, which you could finance for $12,200 down and $412 per month after that.

2. Peer-to-Peer Loan

Whoa, people are so passionate about the tiny house movement they’ve created a peer-to-peer lending network called Tiny House Lending.

“We’ll match you to the ideal lender based on your credit history, the amount you want to borrow and the state you live in,” explains the website. “From there, simply complete a brief loan application and you could receive an offer within a few hours!”

Best of all, you don’t need collateral or a down payment.

3. Home Equity Loan

Are you using your tiny house as a second home? Then you can use your primary residence as equity.

“Say your primary residence is worth $220,000 and you owe $150,000 on that home's mortgage loan. You then have $70,000 worth of equity, ” explains Dan Rafter for the Christian Science Monitor.

“Most lenders will loan you a percentage of that figure in the form of a home equity loan or home equity line of credit.

4. Unsecured Loan

As opposed to the previous loan, which uses your house as collateral, an unsecured loan has no collateral; this makes it riskier, and thus it has higher interest rates.

“Borrowers with high credit scores, low debt, a steady job, and strong incomes” are more likely to qualify for these loans, a representative of Lightstream told Rafter.

If you want to learn more about all of these options, I recommend Dee Williams’ book “The Big Tiny.”

Going minimalist and moving into a tiny house doesn’t have to be just a dream. With a little creativity when it comes to financing, you could fund the mini domicile you’ve always wanted!

About the Author

Susan Shain has written extensively about personal finance for Student Loan Hero, The Penny Hoarder and other publications. Her work has also appeared in The New York Times and MarketWatch.

Written on October 6, 2016

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