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You generally have a few options when financing a tiny house:
Many tiny houses are on wheels. If that’s what you’re looking for, RV loans could help you with funding. To qualify, your home needs to be certified by the Recreational Vehicle Industry Association, which makes sure it meets safety requirements for living and traveling on the road. It also must be made by a manufacturer. You can get this type of financing either through your home’s manufacturer or a provider that offers RV loans.
If you’re looking to buy a tiny house with a solid foundation or want to build your own RV, you might want to consider taking out an unsecured personal loan. You can typically use these term loans for any legitimate purpose and don’t have to put your home up as collateral.
If you’re building your home, you might want to consider taking out a line of credit. That way, you’ll have continuous access to funds and can take out what you need, when you need it. A personal line of credit can prepare you for unexpected expenses that don’t factor into your initial calculations.
While your tiny home likely won’t be eligible for a traditional mortgage, you may still be able to qualify for a chattel mortgage. These work more like car loans than mortgages — your lender will technically own your home until you finish paying off the loan.
Chattel mortgages can be especially helpful if you park your tiny home on leased land or intend on moving frequently. They tend to have lower interest rates than personal loans and may have lest strict eligibility criteria than other financing options.
Unconventional homes call for unconventional forms of financing. Most mortgages come with minimum limits on how much you can borrow, which tiny houses often don’t meet. Also, they can only be used for homes with a solid foundation — many tiny houses are built with the ability to be moved from one place to another.
Imagine this scenario: Amelia recently graduated from college and was loaded with student debt. Owning a home was always a dream of hers, but getting there seemed impossible with her monthly student loan payments and entry-level job. A tiny house, however seemed like a possibility — which became a reality when she found a pre-built RV house for $68,000 through a tiny house manufacturer.
Here’s how the costs broke down:
She looked around for different personal loans and decided to finance directly through the manufacturer — it was easier and the rates weren’t that different from what other lenders were offering. She got a 15-year loan with a 5.59% interest rate and a 20% down payment of $13,535.60 — which her parents loaned her without interest. This meant that she had 15 years of monthly repayments of $445.
Other costs included a $97.02 annual registration fee for a 9,000-pound trailer in New York State and a $950 monthly rental fee for an RV spot with electricity and water included.
Her total housing costs added up to about $1403.08 per month.
Should I pay off my student loans or buy a house?
Tiny houses are most often defined as residential buildings less than 500 square feet — though sometimes anything less than 1,000 square feet is considered a tiny house. They tend to cost a fraction of a regular home, which can come with thousands of square footage. But that doesn’t mean it’s cheap. How much you can expect to pay depends on whether you plan on buying a tiny house or building one.
It also depends on your area’s regulations. Some local governments require homes with a foundation to be a certain square footage. Others have restrictions to camping on private land — which applies to your home if it’s classified as an RV. Make sure you know your local laws before deciding where or what to build.
This can be the easiest way to do things, but there are still several costs to consider, especially if it’s an RV. If your home is built on solid foundations, your main costs are the home itself and the land.
If you’re buying an RV, you can either buy land, park it on private property belonging to friends or family, rent a long-term RV spot or move it around public land. But you’ll also pay for a trailer license, yearly RV registration fees — not to mention having a car strong enough to drive it around.
|Tiny house or RV, including extras and shipping fees||$10,000–$150,000 (Average is around $60,000)|
|Buying land||Over $200,000 (plus property taxes), depending on location|
|Renting an RV spot||$500 per month plus water and electricity hookup fees (around $450 per month)|
|RV registration fee||$20–$200 a year, depending on state regulations|
Building a tiny house, is usually cheaper than buying one, with costs typically adding up to between $10,000 to $40,000. But they can take a long time to build — sometimes even years. On top of the expenses like buying land and getting a trailer license listed above, here are some of the main expenses you can expect to come across when building your new home:
|Doors and windows||$1,000–$3,000|
|Hiring an electrician||$1,500–$3,000|
|Other bathroom fixtures and plumbing||$600–$2,000|
|Cabinets (storage and kitchen)||$1,500–$5,000|
|Screws, nails etc.||$500|
|Your time||400–600 work hours|
Don’t have the time — or skills — to do all that work? Some manufacturers can meet halfway with a tiny house shell. All the basics are pre-installed like water lines, electricity and sewage systems, but you can still customize it to your liking. These typically cost between $10,000 and $35,000.
Or you can buy a prefab tiny house kit, which you can put together yourself for less than $10,000 or hire someone to do the work for you.
Tiny houses may be trendy now, but they might not be worth it if…
Tiny house living is a lifestyle that’s not for everyone. While it’s cheaper than buying a house, you probably won’t be able to sell it for a profit like other types of real estate. Make sure everyone’s onboard before you buy one and also be aware that life changes — like an unexpected pregnancy — have made many families reevaluate their decision.
If you’re sure it’s the right thing for you, you might want to start by comparing personal loans to get an idea of how much it’s going to cost you on a monthly basis and in the long run.
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