What’s the Best Way to Pay For a Tiny House? A Tiny Mortgage or a Personal Loan – A tiny home can be a practical and affordable way to become a homeowner. With their smaller size and simple structure, these homes are less expensive to build and maintain.
If you’re concerned about how to finance one, there are personal loans and, in some cases, specialized mortgages that can help you get started.
Is a Tiny Home Right for You?
Tiny homes come in all shapes and forms. Some are built from shipping containers, trailers, RVs, or converted buses, while others are custom-designed from scratch. You can build one yourself, order a prefab kit, or hire a company to construct one for you.
You can find prefab and kit homes online through platforms like Amazon or major retailers such as Home Depot and Walmart. Some kits start at prices under $10,000. The average tiny home kit ranges from 100 to 400 square feet and costs between $30,000 and $60,000, depending on the complexity.
Note: Be sure you’re comfortable with the lifestyle changes that come with tiny living, including limited space and storage.
How to Finance a Tiny Home
There are different ways to finance a tiny home, but we have listed the most reliable way to become a tiny homeowner.
Personal Loans
A personal loan is one of the most accessible ways to finance a tiny home. You borrow a lump sum and pay it back in installments over time. Most personal loans are unsecured, which means they don’t require collateral, but they often come with higher interest rates.
Some lenders offer approval within one business day, and loan terms are usually shorter than those of a traditional mortgage. Your interest rate may be lower if you have:
- A strong credit score
- A low debt-to-income ratio
- A secured loan backed by your tiny home, such as an RV
Personal loans are available from banks, credit unions, online lenders, and peer-to-peer lending platforms.
Chattel Mortgages
Traditional mortgages are rarely available for tiny homes because lenders usually require the property to be on a permanent foundation and meet minimum value thresholds.
Instead, you might qualify for a chattel mortgage, which is a loan secured by movable property like an RV or a trailer home. While it allows you to finance a tiny home, there are important differences from a standard mortgage:
- The lender owns the home until the loan is repaid in full.
- Interest rates are often higher than those on traditional mortgages.
- Repayment terms are usually shorter.
- Requirements may be less strict, with fewer inspections or appraisals needed.
Be aware that these loans carry added risks, such as fewer refinancing options, limited legal protections, and the possibility of repossession if you fall behind on payments.
Final Thoughts
Tiny homes can be an affordable step into homeownership, but financing one takes careful planning. Whether you choose a personal loan or a chattel mortgage, it’s essential to understand the terms and risks.
Also, be sure to review your local zoning rules and building codes, which may affect where and how you can place your tiny home. With the right approach, a tiny home can offer big value and long-term benefits.
