Paying for a tiny house is a big consideration for most people. There are all kinds of options available to you, but not every option will be good for your situation.
Can you buy a tiny house with a mortgage? The answer is yes, but there are some things to consider before doing so, like how tiny houses are financed, the interest rate, and if loans are a good idea.
This article will explore financing options, including mortgages and loans. Keep reading for more information and tips.
Can I Buy a Tiny House With a Mortgage?
Yes, but there are hurdles you may come across while finding a lender.
First, you need to understand how tiny houses are financed. Most traditional mortgages won’t work for a tiny house because they usually have maximum square footage larger than what most people build in their homes.
For example, an average home has square footage between 1200 and 2500, depending on the region. A tiny house is usually under 400 sqft.
Because of this difference in size, you’ll need to find special lenders that offer loans for smaller structures like tiny houses or mobile homes with less than 400-square feet.
You may also find that the interest rate is higher than you’d expect for a traditional home.
Hard Money Loans
Loans are also called hard money loans, and they can be used for commercial and residential properties, but only if it’s under 400 square feet.
These loans don’t require as much paperwork or credit checks because there isn’t enough room to build a home.
This is why it’s important to have all your finances in order, so you can find the best options for financing and not get stuck with a high-interest rate or other problems.
The biggest pro for taking out a loan is that you can build your tiny home exactly how you want right away without having to worry about finding financing first. It’s quick, easy, and you can have your tiny house in no time.
The biggest con for taking out a loan is the high-interest rates that come with it, especially if you don’t pay off the full amount quickly enough. It’s also important to make sure that any mortgage has an option to be paid in full so there are fewer fees.
What Are My Options If I Can’t Get A Loan?
If you don’t want to take out a loan on your tiny house, you have other options.
- Find a partner
- Sell your current property
- Rent or Lease
Find a Partner
The first is to find a partner that wants the same thing and buy together. You can even save money by having one person do all the building work before moving in together.
The biggest pro for finding a partner is that you have somebody to help with the building process, and they can move in as soon as it’s done. You also don’t need any financing or loan because it’s free labor during construction time.
Since there are two people instead of one, there will be less work to be done overall, and there’s less risk of being ripped off or having a partner that wants to take advantage of you.
The biggest con for finding a partner is that it can be hard to find the right person who has the same goals as you, especially if you live in an area where tiny homes aren’t very common yet. There also might be unforeseen costs or expenses that you weren’t expecting.
Another con is if one partner decides they want to quit the project, then there are two houses instead of one, and both will need a lot more work to become livable again. You’ll also have wasted money on time spent building when not all of your labor has been paid off yet.
Sell Your Current Property
Another option would be to sell your current property and invest what you get from it into buying a tiny house instead of renting.
For example, if you have a $300k property that you sell and invest in buying the tiny house instead of renting. You’d save over $100k right away by doing this.
The biggest pro to selling your current property is that you’ll have an easier time getting a loan for the tiny house because it’s considered “income” instead of having just a savings account.
Having more income than expenses will also make it much easier to get financing from most lenders, especially if they see how much money you’re able to save by selling the current property.
The biggest con would be that you need to have a new place for your family or business to move into, and it might not even work out finding financing if they don’t want to sell their own home.
Rent or Lease
Another option would be to rent out your current property while living in a tiny house, then save up for a down payment so you can buy something after some time has passed.
This is probably the easiest way to get financing from a lender, especially if they see that you have a stable income and can pay rent for the current property every month.
The biggest pro of renting out your old home is that it won’t cost much more than what you’re already paying to live in it. And while saving up money for a down payment on another house, you’ll have more than enough to cover the cost of rent, utilities, and other expenses.
The biggest con is that this option takes a very long time compared to others because there are so many costs involved with having two homes instead of just one. There will also be added stress on top of all the work needed to build the tiny house.
Summary
These options are great ways to save money and get a better house, but they all come with their own pros and cons for the future. It’s important to think about what you’re looking forward to in your life because that will make it easier when choosing which option is best for your situation.