Financing Your Tiny House
Before you can even think about financing your tiny house, you need to be very clear about how much building or buying it will actually cost. There is no point in thinking about financing when you have no idea how much money you will need!
So first of all, have a look at the house you might want to buy and see how much it costs, or make a proper budget for building your tiny house. Once you have a clear idea about how much money you need, you can move on to finding the money.
Is financing your tiny house different from financing a normal house? The case of mortgages
Unfortunately, most banks do not see a tiny house as a proper house, so you will most likely not be able to get a mortgage on it. This is the one reason why financing your tiny house can turn into a bit of a challenge when you have no money to begin with—or only very little. The best option would, of course, be to only use your own capital for financing your tiny house. In many cases, however, this is not possible as there is not enough capital.
So how do you get the money?
Fortunately, the increased popularity of tiny houses has also led to an increased variety of ways to finance your tiny house. Let’s have a look at them. One of those solutions will be the right one for you—or rather one of them has to be the right one because otherwise you’ll have no other choice but to save up until you have enough!
Some tiny house manufacturers offer their own credit scheme. This means that you will pay monthly payments to the manufacturer until the house is paid off. This also includes interest like any credit does—but the manufacturers of tiny houses often have fairer terms and interest rates than banks and loan sharks. Most manufacturers want to see more people living in tiny houses and enjoy getting monthly payments instead of huge lump sums every few months.
If a manufacturer does not offer this option, they will often be able to give you good advice on financing—after all, they would like you to become their customer.
Peer-to-peer lending has become a good option for people who would like to build or buy their own tiny house. There are even specialized platforms for lending and borrowing money for tiny houses. You will have to pay interest, of course, but the interest rates are usually fair.
Friends and family
If you know that one of your friends is rich or one of your family members has some decent savings, they are also an alternative. Ask them whether they would lend you the money at a fair interest rate; after all, you need to encourage them a little to part with their money. With a saving account, they get interest on their money, and if you do not offer anything to them, they will most likely not be very eager to loan you the money.
Unsecured bank loans
Unsecured bank loans are very hard to get but they are an option if you have a very good, no, an excellent credit history. You will have to talk to you bank about this, and your bank will have to be able to trust you. It is very likely that a request for an unsecured loan will be declined unless the bank is 120% sure that they will not lose their money.
Secured bank loans
Secured bank loans are a bit easier to get than those that are unsecured. All you need for them is something that has a decent value, like a car, a motorbike, a boat, or an RV. In addition, you need a stable income, and the bank will still have to make a decision on whether they think that you are trustworthy and reliable.
If you have a bad credit score, it will be unlikely that you get a big bank loan of any kind.
There is a special RV loan that could be used to finance your tiny house. However, the company which sells the tiny home to you must have an RVIA certification, otherwise you will not be able to apply for the RV loan.
While a tiny house is not quite an RV, this option is often used to get around the problems you might have in accessing other sources of money. Talk to your tiny house manufacturer whether they are RVIA approved.
Credit cards are a possibility when it comes to financing your tiny house—but it is a very risky option, and you need to stay on top of your payments, otherwise you will end up in serious financial trouble, and the dream of your tiny house might be over before you can even move in.
Or go the slow road: build your own and pay as you go
If you want to build your own tiny house, then there is also the option to pay for materials as you progress. You do not need all the money upfront and building your own tiny house can take a year or longer. This will enable you to spread the costs along the way and you will not end up owing money to anybody—or at least not as much as if you wanted to pay for all the materials in one go.
If you are lucky and clever, you might also be able to find a lot of the materials you need for free or for a very cheap price. Sites like the Freecycle Network, or local dumps, are excellent sources for materials and items you might later use for the interior of your tiny house.
(Photo Credits: www.usatoday.com)