Tiny houses have become one of the most popular housing trends of the decade. Downsizing to a tiny house can be financially liberating for people who dread having to pay a mortgage for 30+ years.
If you’re ready to downsize and embrace the tiny house lifestyle, it’s essential to find the best way to finance your new house. It can seem complicated trying to get finance, but if you do your research and use the right resources, it can be easier than you think.
Scroll down to find out more about how to finance the purchase of a tiny house.
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How much does a tiny house cost?
This varies but expect to pay anywhere between $50,000 to $160,000. This put a tiny house in a price range similar to that of building a granny flat. The total cost will depend on a few factors, such as:
- the size of the house;
- whether it’s built on wheels, stumps, or a foundation;
- if you hire professional builders, DIY, or buy pre-built;
- customisations like AC, water tank, or solar power.
Many companies offer base models at different sizes for different prices. Any upgrade to the base model will add to the total cost. Other costs to keep in mind include annual registration fees and rental fees for land with water and electricity access. Research different companies and the models they offer to get an idea of how much you expect to spend.
Are there home loans for tiny houses?
In Australia, tiny houses are legally classified as caravans, so getting a home loan for one isn’t typically an option. Since they are considered caravans, you can apply for a caravan loan, similar to a secure personal or car loan. To qualify for a caravan loan, you need to be 18 years or older, and also be an Australian resident with proof of a good credit rating.
Like any other loan, when considering a caravan loan, you should look at different providers to find what works best for you. Most lenders require a deposit of 20% with interest rates between 4% to 14%.2 Caravan loans are an excellent option for financing a tiny house but aren't the only option.
Alternatives ways to finance a tiny house
Besides taking out a caravan loan, there are a few other options to finance a tiny home. Prior to making a final decision, make sure to research all your options, as it will allow you to find the best possible interest rates or repayment options.
- Finance through a tiny house company. Some tiny house companies are now offering finance. The company you choose to buy from will work with you to get you approved for a loan.4 Most companies require a 30% deposit with interest rates starting at about 6.49%.3
- Unsecured personal loan. Unsecured personal loans are more flexible and are easier to get, but they charge a higher interest rate since you don’t have to put any collateral down. Your interest rates depend on your credit rating and range anywhere from 5.49% to 8.99%.
- Access equity. If you already own land, you can do a valuation to see how much equity you have in it. If you have equity, you can talk to your current lender to see if you can increase your existing loan to finance your tiny house.
- Chattel mortgage. This is a type of loan for manufactured homes or mobile property such as a tiny house on wheels. Interest rates on these loans are usually between 3.49% and 7.99%, but they use the tiny home as collateral. So if you’re struggling financially at any point during the loan period, you may lose your home.1
You may not be able to take out a home loan, but there are plenty of other options when it comes to financing a tiny house. When looking for a lender or any alternative way to finance your tiny house, do extensive research, so you know you're getting what you want.
Tiny houses are good for downsizing, living a minimalist lifestyle, and they’re an inexpensive way to own your own home. Whatever your reason for buying a tiny house, it doesn’t need to be expensive or complicated to finance it. Consult a financial advisor for extra information on financing the tiny home of your dreams.