How to Finance a Tiny House
Need a little help financing a tiny house? We’ve got options.
Since the summer of 2014, the topic of tiny houses has rapidly gained popularity, especially in the U.S. From tv shows to tiny house communities, the tiny house movement is making a big commotion in the housing industry. But behind every tiny homeowner’s dreams of flexibility, living a simple life, and helping the environment comes a more serious question: how do you finance a tiny house?
Can I take out a mortgage for my tiny house?
In short, yes. While traditional lending options for tiny houses were scarce in the past, Cardinal Financial now offers Conventional financing for tiny homes, container homes, and other similar properties. Here’s the catch. The only way to get a Conventional mortgage for a tiny house is if it’s built on a foundation—it can’t be mobile.
If it’s mobile, it’s not considered real property, therefore, it doesn’t qualify for a traditional mortgage. Aside from that, if your property meets all applicable appraisal requirements and your credit score is above 620, you should be good to go. We’ll also accept down payments as low as 3%, so if you see a tiny house in your future, there’s a good chance you’ll be able to finance one with us.
While traditional lending options for tiny houses were scarce in the past, Cardinal Financial now offers Conventional financing for tiny homes, container homes, and other similar properties.
Do it yourself
Since tiny houses are significantly cheaper than traditional homes on the market, it’s safe to say you can probably come up with financing on your own. If you already have a primary residence and you’re not in a hurry to move, a good bet may be to make your current living situation work as long as possible and save up during that time. Then, when it comes time to finance your tiny house, you can pay solely from your savings. While this method takes longer than other options, the benefit is moving into your tiny house debt-free! That’s something traditional homeowners can’t tout.
Borrow from friends and family
If you’re someone who has generous friends and family who support your tiny house dreams, it might be worth it to ask them for financial support! Benefits may include: You don’t have to involve a financial institution. You get to determine the payback schedule with someone you know well and trust. You might even be able to borrow without interest. Basically, the two of you can make your own rules, so long as the agreement is fair and doesn’t leave either one of you in financial straits.
If you’re someone who has generous friends and family who support your tiny house dreams, it might be worth it to ask them for financial support!
One of the coolest things about the tiny house movement is that it really feels like a community. This vibe comes to life through peer-to-peer lending sites where prospective tiny homeowners can access funding and get connected to third-party lenders. Normally, these lenders are investors who genuinely desire to help tiny homeowners achieve their tiny living dreams and are supportive of the big-picture tiny house movement. How cool is that?!
Other types of loans
Secured Loan: Secured loans are tethered to property. This means you can borrow money from a secured source, such as equity in your primary residence, another property, or even a paid-off car. With a secured loan, you can borrow money against your assets and use that money to finance your tiny house.
Unsecured Loan: Unlike secured loans, unsecured loans are not attached to a piece of property. You can borrow an unsecured loan from your bank once they determine that you have qualifying credit.
Manufacturer Loan: This type of loan is quite common in the tiny house industry. Many tiny house manufacturing companies have their own financing set up and will offer this type of loan to their tiny house customers.
Construction Loan: If you’re a real go-getter and you want to build your own tiny house, a construction loan will help you borrow as you build. These loans typically require interest-only payments during construction with the full balance due upon the house’s completion.
Installment Loan: An installment loan is a loan in which you borrow a specific amount from a lender and agree to pay it back, plus interest, in a series of monthly payments. These can be originated from your bank and are considered a generally safe and affordable alternative for tiny home financing.
RV Loan: If you’re like the majority of tiny homeowners, you joined the literal bandwagon because you wanted a mobile lifestyle, fulfilling your desires for freedom, flexibility, and more travel. However, as aforementioned, mobile tiny homes do not qualify for traditional mortgages because they’re, well, mobile. The good news: tiny house manufacturers are now classifying their products as “trailers,” making them available for RV loans. The downside: RV loans are not for primary residences, so you’ll need somewhere else to call home in order to qualify. In addition, the interest rates on RV loans tend to be higher than those of traditional home mortgages.
So which way is best?
Truth be told, there really is no “best” way to finance your tiny house. Just like the reasons why people choose tiny living are different, their financing methods will be different too. As with any big financial decision, it might be wise to contact your financial advisor to discuss which option is best suited for your personal needs and financial situation. We hope this article helps you decide which tiny house financing option works best for you.
Does taking out a mortgage for your tiny home sound like your best option? We can help you out! Call Cardinal today and let’s get started.