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The concept of tiny living has been gaining popularity in the United States for some time: In fact, there are now more than 10,000 tiny homes in the U.S (according to iPropertyManagement).
Let's take a look at what a tiny house is, how to finance a tiny house, and the planning that goes into living in a space that small. Tiny house financing differs from that of a normal property as you're unlikely to be able to get a mortgage loan -- but there's still plenty of tiny house loan options.
The average price to build a tiny home is $65,000. That's a major money-saver compared to building a traditional 1,000-square-foot home -- which could set you back somewhere around $163,000.
Despite the lower price tag, there are additional expenses to watch out for when financing your tiny house. For example, if you want the freedom to move your tiny home, there are fees incurred with each move. These might include a trailer license, and sanitation and septic permits.
If you're looking at tiny home financing, you'll find a variety of options. Here are the things you'll want to know when looking for the right financing option for your tiny home:
As an incentive to purchase tiny home kits, some manufacturers offer financing options. This may be convenient, but it might not be the most affordable option. Make sure you compare the interest rate and terms offered by your manufacturer against those offered by other lenders.
A personal loan may also be a great way to finance a tiny home. In fact, the best personal loans often offer attractive options, like:
Lightstream: With a minimum credit score of 660, you can get a loan of up to $100,000 with a repayment term of up to 7 years.
If your credit score has taken a hit but you really want to get a loan for a tiny home, don't be discouraged. You may still qualify for a personal loan for bad credit.
You can use the calculator below to estimate the monthly payments for a tiny house personal loan.
Get the best rates and terms to fit your needs. Here are a few loans we'd like to highlight, including our award winners.
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.
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.
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.
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.
Here are a few other questions we've answered:
Looking for a personal loan but don’t know where to start? Our favorites offer quick approval and rock-bottom interest rates. Check out our list to find the best loan for you.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
Citi Personal Loan disclaimer:
**Rates as of 05-31-2024. Your APR may be as low as 11.49% or as high as 20.49% for the term of your loan. The lowest rate quoted assumes excellent credit and a loan term of 24 or 36 months. Your APR will depend on a variety of factors including your creditworthiness, term of loan, and existing relationship with Citi. For example, if you borrow $10,000 for 36 months at 15.99% APR, to repay your loan you will have to make 36 monthly payments of approximately $351.52.
There is a 0.5% APR discount if you enroll in automatic payments at loan origination. Additionally, existing Citigold and Citi Priority customers will receive a 0.25% discount to the interest rate. If you are in default, your APR may increase by 2.00%. No down payment is required. Rates subject to change without notice.
You must be at least 18 years of age (21 years of age in Puerto Rico). Co-applicants are not permitted. Loan proceeds cannot be used for post-secondary educational or business purposes.
If you apply online, you must agree to receive the loan note and all other account disclosures provided at loan origination in an electronic format and provide your signature electronically.
Credit cards issued by Citibank, N.A. or its affiliates, as well as Checking Plus and Ready Credit accounts, are not eligible for debt consolidation, and Citibank will not issue payoff checks for these accounts. If you are unsure of the issuer on the account, please visit https://www.citi.com/affiliatesproducts for a list of Citi products and affiliates.
Rates quoted are with AutoPay. Your loan terms are not guaranteed and may vary based on loan purpose, length of loan, loan amount, credit history and payment method (AutoPay or Invoice). AutoPay discount is only available when selected prior to loan funding. Rates without AutoPay are 0.50% points higher. To obtain a loan, you must complete an application on LightStream.com which may affect your credit score. You may be required to verify income, identity and other stated application information. Payment example: Monthly payments for a $10,000 loan at 8.49% APR with a term of 5 years would result in 60 monthly payments of $205.12. Some additional conditions and limitations apply. Advertised rates and terms are subject to change without notice. Truist Bank is an Equal Housing Lender. © 2024 Truist Financial Corporation. Truist, LightStream, and the LightStream logo are service marks of Truist Financial Corporation. All other trademarks are the property of their respective owners. Lending services provided by Truist Bank.
*Upstart Loan Disclaimer
The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 21.97% and 36 monthly payments of $35 per $1,000 borrowed. For example, the total cost of a $10,000 loan would be $12,646 including a $626 origination fee. APR is calculated based on 3-year rates offered in the last 1 month. There is no down payment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application.