Tiny house financing: What you need to know

Tiny houses can be extremely satisfying to look at, but when you’re ready to move from pinning images of them on Pinterest to actually owning one, a number of tricky real world challenges arise. There’s the matter of where you can build and park them legally for full-time use—which we’ve previously addressed here—and then there’s the money stuff, like financing the purchase of a tiny house. Indeed, as the tiny house industry matures, options for financing these alternative dwellings are slowly emerging.

While tiny houses are billed as a more affordable alternative to the traditional house or apartment commanding a hefty down payment and mortgage, the latest turnkey models often come with price tags of between $50,000 and $100,000—an intimidating sum, though still less than what’d you need for a traditional home loan.

For those unable to pony up the cash themselves or secure funds through family and friends (buying out the tiny house from the get-go is still the best case scenario), there are a few other options.

Finance directly through RV-certified tiny house builders

Just as is the case for navigating building and zoning codes, financing is more straightforward with RVIA-certified tiny houses since lenders consider them similar to RVs. Major tiny house RV builders like Colorado’s Tumbleweed and Wisconsin’s Escape work with lenders to offer financing for customers who qualify, and typically require a 15 to 20 percent down payment.

Tumbleweed

Both have quick financing applications online. Tumbleweed’s rates vary but the company says its financing plans have down payments from under $13,000, monthly payments starting at $450, and usually last 15 years. A typical financing plan with Escape has a 15 percent downpayment and an APR of 4.5 to 5.5 percent lasting 15 years. According to Escape, about 30 percent of its customers finance through the company directly.

Personal loans

Again, securing a standard bank or credit union loan is easier for tiny house RVs. Still, there are also a few online lenders that are ready to cater specifically to tiny home buyers. Lightstream, a division of SunTrust Bank, offers fixed APR rates—which are lower for RV-certified builds—and comes recommended by builders like 84 Lumber and Tiny Heirloom.

Tiny Heirloom

Other financing services recommended by tiny house builders we’ve covered—like New Frontier Tiny Homes and Wheelhaus—include SoFi, Prosper, and Rock Solid Funding. New Frontier Tiny Homes specifically notes that it’s able to make its builds RV-certified to help customers find loans.

The bottom line

The best option for buyers will largely depend on income, credit history, and existing assets. For example, those who are already have a mortgage on a traditional house might even consider a home equity loan for, say, a tiny house on their property that will serve as a secondary dwelling. These so-called “accessory dwelling units” are on the rise around the country and you can find a more detailed comparison of ways to finance them here.

Finally, according to Kai Rostcheck, who ran tinyhouselending.com (a now-defunct site that connected tiny house buyers with suitable loans), tiny house loan seekers should also consider any additional costs of ownership, like monthly parking fees.

“If you take out a $1,000 a month loan, that might be quite favorable compared to rent in many areas of the country, but add another $500 for parking and the value proposition may shift,” he explains.