The Tiny Home Lifestyle is sweeping the nation. Now we are seeing all the diverse preferences being pursued. Diversity is being expressed in lots of ways including homes on wheels and off wheels. Tiny, small, and wider and longer homes seem to popping up everywhere.
People are making new decisions about what the American Dream is or is not based on what they personally want out of life.
When it comes to financing a Tiny Home or alternative housing plan, you have to approach with determination and a little creative thinking. The large banking institutions are scrambling with new notions and aren’t catching up with this fresh wave of thinking.
The banks have to regroup in some ways. In times past, customers lined up to get the chance to sign for a huge mortgage that sometimes was a lifetime contract. Now, there are people who have begun to question the established life plans. They want something else, something different than what their parents wanted.
Interest rates have been artificially held down for the last few years, that is already starting to change. You can refer to it as the cost of money. Yes, using someone else’s money 'costs money'.
When a bank loans money on a large 30 year mortgage, they make a lot of money on that contract. On the other hand, when a bank loans money on a small short term item like Tiny House, they don’t make as much money. That is one of the reasons there is some resistance on the part of banks. They are starting to come around. A little piece of pie is better than no pie.
Another reason a bank resists a Tiny Home loan is because it is on wheels. If someone defaults on a loan, it’s not so easy to repossess a Tiny House if they can’t find it.
There are a couple of things that will help change this all. A title on a Tiny House is one thing, making it legally possible for the Bank to retain ownership until the loan is repaid in full, just like a car. Just like on a car loan, insurance is required. On a Tiny Home insurance companies will hold back if they cannot establish value with credibility. They only way to establish credibility of the build with value is to have inspection documentation by a third party as the unit is built. That is why build inspections must be performed just like house building inspectors that you have on a residential build.
Another consideration for a Tiny Home buyer is where to park. There is a place for everything. Zoning laws govern where we can park Tiny Homes, some place are embracing the new ways, others are less than accommodating, even banning Tiny Homes altogether from some cities. Harsh stands against Tiny Homes are having some reversals now though as this movement is here to stay. County commisioners get replaced, and new thinking get infused in. Tiny Homes are undeniably the perfect solution in many ways for a large group of people. Where to park a Tiny Home is for another blog coming up soon.
So, the interest rate for a Tiny Home is most likely going to be higher that one would want. Interest rates for cars has also been held down artificially low, almost nonexistent on some car loans. If you didn’t already know this, the interest is built in to the price you pay for the car. It’s been hidden in there somewhere so you think you are getting the car for an unbelievable great rate. (Sorry car dealers to let that out of the bag.)
A fully equipped Tiny Home costs around $70,000 plus or minus. So let’s compare that price along with a going interest rate to see how much this costs. You may be surprised that when you look at what is called ‘the sum of the interest’ you can very easily justify the cost of the Tiny House along with the interest to pay for it. It is a short term loan compared to a home mortgage from times past, and no matter where you live, it costs money. Using credit can save you money if it is used properly. Below is a chart that paints a picture.
Note that total cost of the Tiny Home is less than 10% of the large home. Of course, you still may need a piece of land, which adds to the price of the Tiny Home plan, but even then, You are WAY ahead.
You will pay $15k in interest, but using credit for this purpose will leave you with a home that you can use for many, many years even after it is paid for. That is a good reason to be sure and spend enough on your Tiny Home to get a well built one. One that will last long enough to really get your money's worth out of it.