Tiny House Financing: Here’s What You Need to Know



Most people who own a tiny home have no mortgage. That’s because it can be challenging to find a mortgage lender willing to finance a tiny home. A tiny home mortgage is usually either too small or not easy to sell to investors, so mortgage lenders are hesitant to offer them.

It’s not impossible, though. And a mortgage can be an affordable way to finance a tiny home. If you’d like to try to get a tiny home mortgage, start by getting pre-approved with multiple lenders. Pre-approval shouldn’t hurt your credit score — so using this method allows you to see your financing options without too much risk. Don’t forget to apply with the bank or credit union you usually frequent. If you have a relationship with a financial institution, they may be more open to approving you for a tiny home mortgage.

Home equity loan

If you already own a home but want to build a tiny house to use as a getaway, a home equity loan allows you to borrow against your existing mortgage. You may be able to snag a great interest rate by using your primary home as collateral for this type of loan. However, your primary residence can be foreclosed on if you default on the loan.

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RV loan

Most tiny homes have wheels, and as such you may qualify for an RV loan if the Recreation Vehicle Industry Association certifies your tiny house. You can get an RV loan for a tiny house through banks, credit unions, and private lenders. The downside is that these loans require a down payment of 15-20%, to protect the lender if you default on the loan. But not everyone has that much cash lying around, or wants to wait to save up for a down payment.

Is a tiny home loan right for you?

The simplicity of the tiny house movement is enticing, but there’s a lot to think about before you join other tiny homeowners in a clutter-free lifestyle. Whether you choose a personal loan, home equity loan, or other method, financing a tiny house is a huge decision. You’re not just taking on a new loan — you’re adopting a new way of life.

If you do decide to declutter and move on to a tiny house, do yourself the favor of rate shopping to find the loan that best fits your goals. After all, the more comfortable you are with your finances, the more comfortable you are likely to be with life.

Still have questions?

Here are a few other questions we’ve answered:

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View more information: https://www.fool.com/the-ascent/personal-loans/how-to-finance/tiny-house/

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