Frustrated by Sky-High Mortgage Rates? Here's How You Might Be Able to Buy a Home Mortgage-Free

If you're just about done with today's elevated mortgage rates, rest assured that you're in good company. The average rate on a 30-year mortgage today is 7.19%, according to Freddie Mac. Meanwhile, the median home sale price in August was $407,100, reports the National Association of Realtors.

So, let's say you were to buy a home at that price and sign a 30-year mortgage at 7.19%. Let's also assume you're able to put down 20% of your home's purchase price at closing, or $81,420.

That would leave you with a monthly payment of $2,208 for principal and interest on your mortgage -- not a small amount. And that number also doesn't include the other expenses that come with owning a home, like property taxes, homeowners insurance, maintenance, and repairs.

Of course, what's frustrating is that if mortgage rates were sitting at more moderate levels, a $407,100 home with a 20% down payment would result in a monthly mortgage payment of just $1,749. That's a monthly savings of $459 and a yearly savings of $5,508.

But what if there were a way to simply avoid a mortgage altogether in the course of buying a home? Chances are, you don't have $400,000 and change lying around to make that happen. But if you're willing to limit yourself to a small amount of square footage, then it may be possible to buy a home outright in cash.

Are you willing to consider a tiny home?

As the cost of housing has gotten increasingly expensive, more buyers have been turning to tiny homes because they're less costly to purchase and maintain. Rocket Mortgage says the average cost of a tiny house is between $30,000 and $60,000, though a tiny home can cost more or less depending on the amenities that come with it and where it's located.

But let's say you don't like the idea of having to pay upward of 7% on a mortgage. If you're in a position to make a down payment of $81,420 on a home, then it means you probably have the money to purchase a tiny home without needing financing.

And even if you don't have $81,420 on hand, let's say you have half of that. That could still cover the cost of a tiny home in full, especially if you're not so picky about the amenities you get.

Is a tiny home right for you?

There are definite pros and cons to buying a tiny house. The clear downside is limited space. Tiny homes typically range between 100 and 400 square feet, says Rocket. And so a tiny home may not be feasible if you have a larger family or expect to grow your family. Plus, you may find that it's harder to sell a tiny home once you're ready to move on than to sell a standard-sized home.

On the other hand, you're apt to have limited maintenance with a tiny home. It should be faster to clean, too. And your utility bills may be considerably lower than what you'd pay to heat, cool, and power a regular home.

All told, you'll need to weigh the pros and cons of a tiny home to make the decision that's right for you. And one thing you may want to do, if it's feasible, is rent a studio apartment for a month through a site like Airbnb and see how well you fare living in limited quarters.

Granted, a tiny house that's detached will be a different experience, but it's a good starting point if you're used to having more space. But if you really can't stand the idea of paying more than 7% on a mortgage, then it could pay to consider an option that allows you to buy a home in cash.