Tiny Houses Mean Towering Hassles In Getting A Mortgage

America’s obsession with tiny homes dates to 1945 when Henry David Thoreau built a one-room cabin on the shores of Walden Pond.

The materials cost him $28.12, which comes to $1,131.06 in today’s dollars, according to the CPI Inflation Calculator.

While building a tiny home today costs more than what Thoreau paid for his abode, it’s still an affordable housing option for many people. But if you don’t have the cash to pay for it, financing the purchase of a tiny home can be challenging.

A tiny house is 400 square feet or less. It can sit on wheels or a foundation and usually costs between $30,000 and $60,000, according to Rocket Mortgage. The median price for a starter home is $233,400, according to the National Association of Realtors.

While that seems to be a reasonable price point, if you don’t have the cash to pay for it, you could struggle to finance a tiny home purchase — minimum home loan amounts can start at $50,000, and most lenders require homes to have a permanent foundation.

But even if you can’t get a traditional mortgage, options are available for financing a tiny home if you don’t have the cash to buy one.

How To Finance A Tiny Home

You could take out a personal loan to pay for your tiny home. But because a personal loan typically has a term of up to seven years, your monthly payments could be high — and so could your interest rate if you don’t have good credit. Annual percentage rates on personal loans range from 3% to 36%.

RV loans may be a good choice if your tiny house wasn’t built on a permanent foundation and can be moved. Some lenders require your tiny home to be your primary residence to qualify for an RV loan. You’ll be required to make a down payment, but you could get a longer loan term — up to 20 years — than a seven-year term for a personal loan. Rates are likely to be between 4.5% and 7.5%.

If you’re purchasing your tiny home from a contractor or builder, they maybe be able to help you get financing for it. Some companies work with lenders to help their buyers finance their tiny homes.

A home equity loan or line of credit could be an option if you own a house and want to add a tiny house to your property.

You could also charge the purchase of your tiny home to a credit card if you have a high enough credit limit, but unless you have the money to pay it off immediately, the high interest charges may not be worth it.

Whether you’re paying cash or financing your tiny home, one thing is for sure — you’re joining a movement that 56% of Americans are interested in.

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