Tiny House Financing: Personal Loans for Your Tiny Home
The market for tiny homes may be getting bigger, but financing options are limited to personal loans, builder financing and home equity loans.
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When buying a standard home, you’d typically get a mortgage. If you’re in the market for a tiny house — commonly defined as a home that’s less than 400 square feet — qualifying for a pint-size mortgage is unlikely.
The mortgage you need for a tiny home may be smaller than a traditional lender’s minimum loan amount, which can start at $50,000. Tiny homes can cost between $30,000 to $150,000. An additional challenge: The lender may require that your tiny home have a foundation on land you already own.
Here are options for financing a tiny home:
Personal loans from online lenders, banks and credit unions.
Financing through lenders partnered with tiny home builders.
Home equity loans, if you own a primary residence.
Tiny House Financing: Personal Loans for Your Tiny Home
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Personal loans for tiny homes
Online lenders offer personal loans that can be used to finance all or part of a tiny house purchase. Loan repayment terms are shorter than mortgages — usually up to seven years — which means you may pay off your tiny home faster, but monthly payments can be high.
Lenders use your credit score and income to determine if you’ll be approved for a personal loan and at what rate. Annual percentage rates on personal loans are from 6% to 36%; borrowers with excellent credit scores (720 and above) will qualify for rates at the low end of that range.
Personal loans are unsecured and don’t require collateral, so you won’t lose your tiny house or another asset if you can’t repay the loan (although your credit score will take a hit).
Use a home improvement loan calculator to determine your potential monthly payment and total interest on a tiny house loan.
Personal loans from a bank
Large national banks don’t usually advertise tiny house loans, but you may still be able to get one, especially if you bank locally and have a good relationship with your bank.
Bank loans have similar rates to online lenders, but some offer discounts or lower rates to existing customers. Banks prefer borrowers with good or excellent credit (690 or higher FICO).
Personal loans from credit unions
Credit unions can be a good source for an unsecured tiny house loan, and building a relationship with a credit union can increase your chances of approval.
Credit unions are not-for-profit organizations that serve members who live or work in a particular area. You have to meet the requirements and pay a membership fee to join before you can apply for a loan.
Two options are First Tech Federal Credit Union and Alliant Credit Union. Both offer unsecured personal loans up to $50,000 that can be used for any purpose.
Loans through a tiny house builder
Tiny houses may be financed through a lender that partners with a builder. These loans are either unsecured (based primarily on your credit score) or secured by the tiny house.
The potential benefits include low starting rates (typically under 10%) and longer loan terms (10 to 20 years or longer) than personal loans.
But this option may require a down payment of up to 20% of the purchase price, and if the loan is secured, you can lose the tiny house if you can’t make payments.
Tiny homes on wheels may qualify for RV loans, but only if the vehicle is certified as an RV by the Recreational Vehicle Industry Association.
Home equity loans
Home equity loans and lines of credit are available if you own a home and want to add a tiny house to the land as an accessory dwelling unit or buy a mobile tiny home.
Home equity loans usually have low rates and long repayment terms (typically more than 10 years), which allow lower monthly payments. But you’ll need equity to qualify, and you can lose your primary home if you can’t make payments.
Tiny house financial risks
The benefits of a tiny house may include lower housing expenses and less upkeep. But factor these costs into your budget:
Purchasing land or leasing a lot.
Parking fees at campgrounds and fuel if you take your tiny home on the road.
RV insurance, construction insurance or homeowner’s insurance, property taxes and permit fees.
Propane tanks for a tankless water heater.
New appliances that fit the home.
Typical housing maintenance and repairs.
Last updated on December 1, 2022
NerdWallet’s review process evaluates and rates personal loan products from more than 35 financial institutions. We collect over 45 data points from each lender, interview company representatives and compare the lender with others that seek the same customer or offer a similar personal loan product. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.
This methodology applies only to lenders that cap interest rates at 36%, the maximum rate most financial experts and consumer advocates agree is the acceptable limit for a loan to be affordable. NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodologies for personal loans and our editorial guidelines.
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