There are a few options for financing a tiny house: builder financing, personal loans, and RV loans.
Manufacturer financing will vary widely and is not offered by every manufacturer. Personal loans are going to carry higher interest rates than a mortgage but lower rates than credit cards. RV loans are available in some cases for tiny homes on wheels, typically carrying lower rates than personal loans. One example of manufacturer financing is a 15-year loan with a 20% down payment. On the personal loan front, there are companies that loan up to $100,000 and with terms up to seven years, which may be applicable to tiny houses set on foundations as well as those qualifying as recreational vehicles (RVs). Rates vary.
If a tiny home has wheels and is transportable, RV loans may be an available option—but the tiny home will need to fulfill requirements set by RVIA, the RV Industry Association, or else you’ll be ineligible for this financing. A tiny home manufacturer ought to be able to confirm whether or not it is built to RVIA specs. RV loans generally carry lower interest than personal loans—because these loans are made against an asset (the RV), rather than against an individual’s credit (personal loan).
There are Matchmaking sites striving to make it easier to get access to funding, by connecting them with networks of third party lenders who want to help them get a good deal.
Home equity loan or HELOC
If you already own a home, you might be able to tap into your home’s equity with a home equity loan or home equity line of credit (HELOC). With these options, you might be able to access 75% to 85% of your home’s equity, depending on the lender and the value of your home.
Here’s how they work:
- Home equity loan: Like personal loans, home equity loans are installment loans that typically come with fixed rates. Because a home equity loan is secured by your home, you’ll likely get a lower rate than you’d get on a personal loan. However, this also means you risk losing your home if you can’t make your payments.
- HELOC: Unlike a home equity loan, a HELOC gives you access to a revolving credit line that you can repeatedly draw on and payoff — similar to a credit card. HELOCs also tend to come with variable rates, which means your rate could fluctuate with market conditions. Also remember that because your home acts as collateral for a HELOC, you risk foreclosure if you don’t keep up with your payments.
Can I Finance a Tiny Home With Bad Credit?
It is possible to get approved for financing for a tiny home with bad credit. You can get approved for a personal loan even if your credit is bad, and some other loan options may also be available. However, you’ll have a tough time getting approved without a co-signer. Even if you do get approved, you can expect to pay high interest rates, which may not make it worthwhile until you’ve had a chance to improve your credit history.