Tiny homes are a top trend in simple living, but how to finance a tiny house can be a tricky question. Make sure to also consider additional costs when deciding how much you'll need to borrow. For example, where to place your tiny home, costs of installing or connecting to utility sources, and costs for construction and applicable permits required for moving or building a tiny house. Borrowing more than you think you'll need can help cover unexpected costs. Whether you can qualify for any or all of these options depends on individual factors, such as your credit, the amount you want to borrow, and local law and regulations for building and living in tiny homes.
Traditional to Trendy: How to Finance a Tiny House
Tiny houses are typically built either on a foundation or on a trailer that allows mobility for your tiny home. How your tiny place is constructed will influence which financing options are available. Tiny houses that are situated on permanent foundations may provide security for a personal or construction loan. Financial institutions may not be as quick to loan against tiny homes on wheels, as they can be moved. On the other hand, tiny homes on wheels may qualify for RV loans. Below are four ways to finance your tiny house.
Personal loan or line of credit
These loans may be secured by your tiny home or unsecured. Personal loans are made for a specific amount, usually carry fixed rates and are repaid at a consistent payment amount over a specific period. A personal line of credit offers a credit line that you can draw against as needed. If you are building your own tiny home, this can be a good option as you pay interest only on amounts you've used.
Tiny homes built on trailers may qualify as recreational vehicles that can be funded with RV loans. This option depends on how your state defines recreational vehicles. If your tiny home is not road worthy, it may not qualify for an RV loan. When shopping for a prefabricated tiny house that will be built on a trailer, ask the manufacturer about options for financing your tiny house as an RV.
Builders and manufacturers of tiny houses may provide financing for their products. When shopping for your tiny house, ask manufacturers if they offer financing options. This can help reduce researching how to finance a tiny house.
This type of loan is typically arranged through a company that qualifies borrowers for loans and connects them with appropriate private lenders. Investor lenders may fund all or part of your tiny home; the company that connects borrowers and lenders will likely take care of credit reporting and collecting payments for your tiny house loan. Peer-to-peer lending requirements and terms can vary; it's important to compare peer-to-peer loan offers to find your best option.
Things to Think About
How to finance a tiny house depends on where you plan to place your tiny home. If you won't have to pay rent or buy land for your tiny home, so much the better. But if you need to purchase or rent land, you likely won't be able to borrow an RV loan. Unsecured personal loans may not cover the entire cost of your tiny house and land, but it can definitely be worth a shot. A secured personal loan may provide more funds and a lower interest rate. Keep in mind that you may need to pay for property taxes and hazard insurance for your tiny home and land. Factor in these costs, along with construction and the cost to move your tiny home to its location, if applicable.
Costs related to building and moving tiny houses can vary according to state and local building codes, zoning and environmental regulations. U.S. News encourages taking time to research building standards and locations prior to buying a tiny house. When you're ready to buy, shop and compare financing options for tiny homes. You won't know what's available until you request and compare loan quotes.