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How to Finance a Tiny Home

tiny homes

Tiny houses are becoming more and more popular. They seem almost ubiquitous these days. There’s even a tiny house version of House Hunters.

They’re so popular, in fact, that one manufacturer from Wisconsin, Escape Tiny Homes, has seen their business increase by roughly 200 percent in recent years. Tiny homes are used as primary residential units, rental units, accessory-dwelling units (buildings next to existing homes), and have even been proposed as a potential solution to homelessness. Tiny home financing, however, hasn’t quite caught up to the marketplace yet.

Mortgages and Zoning Laws

The question of how to finance a tiny home is troublesome because traditional mortgages may not cover the notably small cost of tiny homes.

Smaller DIY units can be made for around $10,000 while the higher range prefab models go for around $100,000. Traditional mortgages may have a minimum loan amount and may only cover buildings with a permanent foundation. Most, if not all, tiny homes fall outside of these considerations.

Zoning restrictions also need to be examined when considering this market.

Because of these two factors, many tiny homes are portable and are built on wheels. This may assist with tiny homes being treated like recreational vehicles, even when you use your tiny home as your primary residence.

Many tiny home manufacturers will work directly with financiers to provide customers with tiny home financing in the form of an RV loan. However, this may  require a down payment somewhere in the area of 15-20%.

How Personal Loans May Help

Personal loans are another popular route to obtain tiny home financing. If your tiny home isn’t RVIA-certified or you would prefer to build your home on a foundation, this could be your best option.

Plus, when you take out an unsecured personal loan, you’re not putting up collateral.

This means that you may not be required to make a down payment on a personal loan.

In addition, Discover Personal Loans include a fixed rate APR, meaning that your monthly payment will never change. For those looking to purchase a tiny home as an alternative to more costly traditional home ownership, these are certainly factors to consider.

Additional Costs

The question of how to finance a tiny home is compounded by the fact that there are also additional costs to consider. Not the least of which is where to situate your tiny home.

As mentioned earlier, zoning laws and building codes must be examined when considering a tiny home. There may be various regulations about where a tiny home can be placed depending on your situation. Different rules may apply if your tiny home is mobile as opposed to fixed on a foundation. Additionally, zoning laws and building regulations may vary greatly from region to region.

This means you need to study up on local laws and regulations that apply to you when you are considering tiny home financing.

Additional fees may include: buying a parcel of land and the associated property taxes, renting a long-term RV spot, a vehicle to tow your tiny home should you need to move, a trailer license and plates, and sanitation and septic permits. All of these costs can add up. These fees may be able to be mitigated with a personal loan. As with most situations, it is best to know exactly what you are getting into before you make your first move. Thankfully, the American Tiny House Association has compiled a state-by-state directory of tiny house regulations to consider.

Use a Tiny House as Guest House (and Other Purposes)

Increasingly popular is the notion of tiny homes as an accessory dwelling unit rather than a primary residence.

These secondary buildings can be used as guest houses, rental spaces, or even a home for aging parents.

If you are looking to add an accessory dwelling unit to your property and you already have a mortgage, you may want to consider a home equity loan as your tiny home financing option. A home equity loan is a type of loan where the borrower uses the equity of his or her home as collateral for the loan.

Benefits of Tiny Home Ownership

There can be a number of benefits to tiny home ownership. It can provide a mobile lifestyle. It can cut back on your carbon footprint. It can lower your utility bills. But perhaps the most compelling reason for tiny home ownership is the cost.

According to census data, the median home price in the United States as of April 2018 is $312,400. With tiny homes costing only a fraction of that price, this minimalist lifestyle is gaining traction.

The reduced cost puts home ownership within reach for many individuals. If you are considering making the move into a tiny home―no matter your reasoning―learn more about how Discover Personal Loans can help.

You can start by estimating your monthly payments using our personal loan calculator.