mall living spaces have become incredibly popular in recent years, and for very good reason: enjoying a comfortable life without a mortgage hanging over your finances is an appealing concept indeed. There are those in the “tiny house movement” that have chosen this unique lifestyle to simplify their day-to-day living or shrug off debt, but there’s still an investment involved with getting started.
One of the most common questions raised by people looking to get started is how to get a loan or funding for their project. With this question in mind i did some research to determine the most popular financing methods and what you can expect when pursuing them. While I was very dedicated in my research, please note that this information doesn’t come from personal experience, so I can’t personally vouch for any of these finance providers.
There are several paths to take when it comes to getting together the down payment or full investment. True, some are easier than others, but you also may not have all of these at your disposal.
Building from scratch requires a great deal of DIY know-how, even with plans, and will still cost a great deal in materials. The advantage of this method, if you’re able to save up thousands of dollars, is that you’ll have your property free-and-clear. Realistically, however, many people that get into tiny homes do so because their current debt and/or living situation has become unpleasant, not because they’ve been scrimping and saving to make the jump.
Personal relationships and money don’t always go smoothly, so if you’re planning on borrowing funds from a friend or family member, get everything in writing. The general consensus suggests that you incorporate an interest rate of 8-10% in your contract to keep the financial terms fair to your lender.
Tiny living space manufacturers would, of course, prefer that you buy their models, so some have enticed potential buyers with in-house lending opportunities. If you’re considering buying a new, pre-built tiny dwelling, be sure to ask your company of choice what resources they have available to interested buyers.
Banks are an obvious source of money, provided that your credit is up to the task. However, much like applying for any other bank loan, you need to be prepared if you’d like to finance your house through a bank. Bring information that shows you’ve done your research on local building codes and the like, so the bank understands you aren’t undertaking such an involved project on a whim. Be sure to ask your bank representative what kind of loan is best for your situation – if you have some collateral, for example, you might be better off asking for a secured loan.
One very specific type of tiny house finance that might apply to your needs is an RV loan. Some manufacturers have worked hard to get their companies classified as RV manufacturers, enabling their buyers to tap into this type of funding. Tumbleweed Homes, for example, has recently had their products reclassified as trailers to give their customers this option.
In that vein, Tumbleweed offers the following advice to potential buyers: Seek out a credit union before buying. If you have access to a credit union and think you’re a good candidate for approval, ask for a little more than you need when buying: it will give you negotiation room as well as “padding” for unexpected expenses like shipping or customization.
The micro home movement is unusual in housing, as its members are often extremely enthusiastic about getting others involved. Some of this enthusiasm translates into peer-to-peer lending, which is exactly what it sounds like. Sites like Tiny House Lending match up those with money to lend with those that need it to build or buy them.
Much like bank loans, this is an option that is more familiar and available to most individuals, but it can come at a high cost. Be sure to contact your credit card provider and determine financing costs like APR in order to have data to compare; while a certain percentage rate might sound appealing now that could change, potentially ending up costing you a lot more when paid back over years.
Your best option will depend entirely on your existing resources, risk tolerance and credit situation. You can get the most honest answers by determining exactly the kind of property you’d like, and its cost, before you start your research – trailer versus foundation, and so on.
Once you know where you stand and where you’d like to be, you can approach friends and family, peers or financial lending institutions with more confidence, and secure funding for a tiny house with minimal effort.
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