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Financing a tiny house

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The “tiny house movement” is one of the hottest retirement living trends and one answer for people seeking a low-cost living alternative.

Tiny houses are carefully designed dwellings that average about 400 square feet, although some are as small as 100 square feet. A few people who live in homes as big as 1,000 square feet claim that they joined the movement. For a good idea of what it is all about, check out HGTV’s Tiny House Builders, a series that started early this year and runs occasionally.

Financing a small challenge

One of the first challenges that extreme-downsizer wannabes encounter is financing their tiny dwellings. The average price of a tiny home is $23,000, according to Todd Nelson, business development officer at LightStream, a division of SunTrust Bank that offers unsecured loans and is doing an increasingly large business in small homes.

Nelson says it can be easier to get financing if the home is on a mobile platform and certified by the Recreational Vehicle Industry Association, or RVIA. Then the home will qualify for a standard recreational vehicle loan with current rates between 5% and 6% for seven years — sometimes more — after a 10% down payment.

If your tiny house isn’t on wheels but also isn’t on a permanent foundation — it remains moveable — Nelson says his company offers unsecured loans for as long as seven years for such purchases up to a maximum of $100,000. You must have good credit and enough income that it appears likely that you can afford to pay for it. Unlike some banks, LightStream will consider all forms of income, including investment and rental income. LightStream also will finance the purchase of a lot for your tiny home.

If your home is going to be on a permanent foundation — meeting all the local zoning codes and licensing rules — then you may find a traditional mortgage lender willing to finance the transaction. If you have a relationship with a credit union, that’s a good place to start, says Alex Pino, who blogs at

Finally, you might want to just save up and pay cash. Nelson says that’s what 68% of tiny-home buyers do.

If you are going to use your tiny home as a second home, here are related expenses to consider.