Financing Your Tiny Home: Part 1

If you estimate how much house you can afford, you might consider even tinier or simpler homes. Tiny houses, by definition, are typically 100 to 400 square feet and built on wheels or purchased land.

​But small isn’t free. The average humble abode costs $23,000 to build, according to iTRaC. Already-built models are typically available for less than $75,000.

Unless you have the cash on hand for your tiny home, you might consider borrowing. Your options include:

  1. Home equity line of credit (HELOC): If you’re considering making a tiny home your second home, you could borrow against your existing mortgage. The downside of a HELOC is that it’s a secured loan, meaning your home acts as the collateral and could be seized if you default.

  2. Home mortgage: If your tiny home is big enough to comply with local building codes and rests on a permanent foundation, it could qualify for a traditional mortgage. But you’d also have to borrow a larger amount of money.

  3. Recreational vehicle (RV) loan: If you’re looking for a tiny home with tiny wheels, you could look to banks and credit unions for RV loans. SunTrust Bank, for example, works with tiny home builders and sellers to offer to finance. Just ensure your home will be certified by the Recreation Vehicle Industry Association to be eligible.

  4. Personal loan: Like RV loans, unsecured personal loans won’t require you to post any collateral to guarantee the debt. Instead, you’re judged on your creditworthiness. The better your credit, the lower the rate you could receive. Personal loans also have more flexibility, as many lenders place few restrictions on how you use the money, whether your mini-mansion is set on wheels or planted on the ground. You could even use personal loans to buy a piece of land for your tiny home to rest.

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