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

Updated March 7, 2024

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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.

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How much does a tiny house cost?

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.

Tiny house financing options

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:

Manufacturer loan

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.

Personal loan

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.

Financing a tiny house: Personal loan calculator

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Mortgage

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.

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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