Tiny Home Financing Options and Tips to Finding Them

Tiny Home Financing Options and Tips to Finding Them.

Tiny Home Financing: Most times getting a tiny home isn’t much of a bad idea. Tiny homes save you a lot of money on housing property costs. But most times financing one can’t be as straight forward as a normal house mortgage.

Tiny Home Financing Options and Tips to Finding Them

This can make you explore other alternatives; including RV loans and home equity loan. Read on to understand what better alternative you have in financing a tiny home.

Tiny Home Financing Options

Most tiny homes don’t qualify for a traditional mortgage loan because of their low cost. Instead, when financing a tiny house, you can opt for the following options.

Personal Loans

Personal loans are a popular option for tiny homes, as they’re extremely flexible and easy to come by. The application process is less detailed and time-consuming than a traditional mortgage, and you can usually get funding in just a few days.

Personal loans are also flexible, so you can use the funds not just to purchase your tiny home, but also to furnish it, decorate it, and cover any other move-in expenses.

Pros

  • Fast funding (usually just a few days).
  • Less paperwork than other options.
  • Unsecured, so it doesn’t put your property at risk.
  • Can use the funds for other expenses.
  • No down payment required.

Cons

  • Higher interest rates than other options.
  • Shorter repayment terms.
  • Higher monthly payments.

LightStream

Lightstream

LightStream is an online lender that offers personal loans up to $100,000. This lender is best for borrowers with good credit and consistent income.

Here’s what else you need to know about LightStream’s tiny house loans.

Lender Info:

  • Minimum credit score: Not disclosed
  • Loan amount: $5,000 – $100,000
  • APRs: 4.99% – 16.79%

Marcus

Marcus

Marcus by Goldman Sachs offers personal loans for borrowers with at least a 660 score. The loans come with no fees and even allow you to skip a month of payments after one year of paying on time.

Lender Info:

  • Minimum credit score: 660
  • Loan amount: $3,500 – $40,000
  • APRs: 6.99% – 28.99%

OneMain Financial

OneMain Financial

If you have a lower credit score and are eyeing a low-cost tiny home, your best bet is OneMain Financial. The lender accepts poor-credit borrowers and offers loans up to $20,000.

Lender Info:
  • Minimum credit score: Not disclosed
  • Loan amount: $1,500 – $20,000
  • APRs: 18.00% – 35.99%

RV Loans for Tiny Home Financing

If your ideal tiny home is on wheels, an RV loan may be a financing option. To be eligible, your house will need to be certified a recreational vehicle. To find a qualifying property, consider purchasing from Vehicle Industry Association.

For an RV loan, you’ll have to use your tiny home as collateral, as you would for a traditional home or auto loan. You can find them through brick-and-mortar banks and a few online lenders.

Pros

  • Usually available with a fixed rate.
  • May offer longer repayment periods.
  • Lower interest rates compared to personal loans.

Cons

  • Uses your tiny home as collateral.
  • House must be RV-certified.
  • Only available on primary residences.

Here’s one of our best RV loans for you to consider:

U.S. Bank

U.S. Bank

U.S. Bank offers RV loans up to $150,000, which you can use to purchase either new or used certified RVs. Interest rates are fairly low if you agree to a four-year repayment term and enable autopay.

Lender info:

  • Minimum credit score: Not disclosed
  • Loan amount: $25,000 – $150,000
  • APRs: 6.24% and up

Home Equity Loans & HELOCs

If you’re already a homeowner and plan to use your tiny house, for example, as a guest house, second home, or vacation property, you may be able to use your primary home’s equity to pay for the new digs.

Home equity loans let you borrow an upfront, lump sum and make fixed payments toward the balance on a monthly basis, using your primary home as collateral.

Home equity lines of credit, on the other hand, let you pull funds as needed, much like a credit card. Often, you’ll pay only interest during the draw period, and then pay down the balance once you stop drawing on the line of credit.

Generally, home equity loans make the most sense, as they provide more security in payments. But HELOCs may be good if you’re not sure of your tiny home costs or you plan to build it out over an extended period.

Pros

  • Come with fixed or adjustable rates.
  • Funds can come via lump sum or as needed.
  • Interest rates are lower than personal loans.

Cons

  • Uses your home as collateral.
  • Adds an extra monthly payment.
  • Come with various closing costs and fees.

Here are our picks for home equity loan and HELOC lenders:

Best Home Equity Loan: TD Bank

Best Home Equity Loan: TD Bank

TD Bank offers low-interest home equity loans up to $500,000. Repayment terms are flexible, ranging from 5 years to 30 years, and you need a loan-to-value ratio of just 80% to qualify.

Lender Info:

  • Minimum credit score: Not disclosed
  • Loan amount: $25,000 – $500,000
  • APRs: 4.49% – 9.76%

Best HELOC: M&T Bank

Best HELOC: M&T Bank

M&T Bank offers the M&T CHOICEquity, a home equity line of credit that lets you borrow up to 89.99% of your home’s value. Borrowers can choose from fixed- and variable-rate loans with no application fees or closing costs.

Lender Info:

  • Minimum credit score: Not disclosed
  • Loan amount: $15,000 – $1 million
  • APRs: 2.99% – 15.90%

Tiny Home Mortgages

The majority of mortgage lenders have loan minimums that far exceed the prices of tiny homes. Many also require the home to be a permanent structure and comply with local building codes.

Still, some lenders offer tiny house mortgages called “chattel” mortgages. They’re typically used to finance things like manufactured homes and other pieces of personal property, and they come with higher interest rates and shorter terms than other financing options.

Pros

  • Come with fixed interest rates.
  • Mortgage interest may be tax-deductible.
  • Fast funding.

Cons

  • High interest rates.
  • Short repayment terms.
  • Uses your tiny home as collateral.

Tiny Home Mortgages

Tiny home loans aren’t the best fit for everyone, and they’re often hard to come by. If you think one may make sense for your tiny home purchase, use our guide to the best mortgage lenders to start your search.

Final Point

After going through you various financing option for your tiny home. These are basic things you should know;

  • Check your local zoning laws and permit procedures
  • Make sure the payments line up with your budget
  • Always compare options to find the best rates

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