Of all the hurdles of going tiny, financing might be the biggest.
What Are Tiny Homes?
Tiny houses, also known as tiny homes, come in many varieties. There is no one agreed-upon definition of tiny houses, but they are generally much smaller than a studio apartment, and free standing, often easily movable.
You may think that getting a tiny house and having a mortgage are mutually exclusive. But you’d be wrong, not all of these houses are particularly affordable, and some of the people who are most likely to buy them are not necessarily in a position to pay for them in cash. For a collection of reasons, mostly related to their new and unexpectedness, financing to tiny house can be tough.
Tiny houses vary in terms of size, materials, and portability, among other things. Some people define a tiny home as anything under 1000 square feet, while others think the threshold is 500 square feet. Tiny home dwellings average about 400 square feet, although some are as small as 100 square feet, with wheels and towing capabilities. If you want to buy or build a tiny home, you can find prices anywhere from $ 15,000 to upwards of $ 50,000. They can look like (or be) shipping containers, cottages, log cabins, or even micro-condos.
Know Your Financing Options
There are two loan types that can be secured for a tiny home: an RV loan for an RVIA compliant house on wheels, or an unsecured personal loan. It’s also possible that you can get a conventional home loan if you are looking to finance a tiny home on a fixed foundation. Otherwise, the RV or unsecured personal loans are generally the best options.
RV Loan
Because many tiny homes are on wheels buyers can often finance them as an RV or travel trailer. The amount the bank is willing to lend generally won’t exceed $ 100,000. The interest rate will be determined by financial factors such as your credit score, debt-to-income ratio, work history, etc. Most banks and credit unions offer RV financing. Your history with a particular bank or credit union can help offset some shortcomings in your credit history. Because of this, your primary bank is a great place to start seeking to finance.
Unsecured Personal Loan
Unsecured personal loans tend to be the best option for most tiny home buyers. 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. You can get approved for a personal loan 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. Interest rates for personal loans are higher than mortgage rates, but will vary depending on your credit score. You can also simultaneously accept multiple loans from different lenders if you need a lot of financing.
The good news for those wanting to join the tiny house nation is that financing options exist through personal loans and RV loans. Sadly, traditional mortgages, with their lower rates and longer repayment periods, are off the table for tiny homes.
