Tiny Home Financing and Insurance

While this may not be the blog post of most peoples dreams, financing and insuring a Tiny Home are massively important factors in the decision making process in whether to go tiny or not.  While we were going back and forth about the possibility of owning a Tiny Home, we found it really difficult to find good resources about financing and insurance.  While we are not experts, we would love to help answer any questions that people like us may also have.  Please feel free to comment with your own experiences in financing and insuring your tiny house. 

Bright sun on a snowy March day!

To begin with financing, it is important to share that we did not finance our home.  We wanted to live debt free, and that meant living mortgage free.  This did require an outlay of cash much larger than either of us had spent on anything in our lives, but some number crunching and basic financial planning enabled us to establish a budget that we were comfortable with. 

However, we did seriously consider taking out some sort of a mortgage or loan in order to have more cash saved up for a rainy day.  A 15-year mortgage with a low monthly payment would have sounded appealing at the right rate.  Unfortunately, since Tiny Homes are on wheels, they are not considered permanent homes by mortgage lenders and you will not be able to get a mortgage for them.  That discovery squashed that option before we could even seriously consider it.

What about other types of loans?  We figured that people pay well over six-figures in some cases for RV's and motorhomes, so there must be some loan options catered to those that could be applied to Tiny Homes.  Although we are sure there is some potential for prospective Tiny Home owners to find a solution down this route, the rates and terms that we found initially were not financially attractive compared to paying in cash.

View into our Kitchen and Living Room from our Bathroom 

What we found is that the loans were structured similar to car loans, but with even worse rates.  In our initial search it was not uncommon to find 5 year loans with 8% APR.  If you crunch these numbers really quickly for a $50,000 home that you put down $10,000 for.  Then at the end of those 5 years you will have paid almost $49,000 by the end of those 5 years, bringing your total to $58,663.35.  Of course, if you go this route you can invest your money and if you do it wisely you can make far more than the $8,663.35 you will have paid in interest, but of course that comes with inherent risk.  At the end of the day, the rates were simply too high for us to seriously consider this as an option, even if there is a lender that would consider a NOAH certified Tiny House under their traditional RV terms. If you do not have that much money saved up, but you do have a steady income, this could be a good option if you do your due diligence.

Last and definitely least, there is an option of taking out a personal loan.  These loans seem to be the most flexible in terms of how you can spend your money, but they come at an absurd price.  The typical terms for these loans are either two or three year loans with 15-18% APR.  We laughed when we saw those numbers and would not advise anyone to finance their Tiny Home with a loan like that.  One of the big attractions of living tiny is financial freedom, but you'd be better off dealing with a mob boss for a loan like that.

Our living room setup

Apparently there are some loan companies getting set up to specifically help people finance tiny home purchases, but these are still in their infancy and we have not yet heard anything about the types of rates or terms that they offer, so I will not elaborate on that option in this blog post.

Moving on to insurance, there are much more straightforward options.  Although there are not many Tiny Home insurance brokers out there, there are a few that can get the job done.  We opted to go with Foremost Insurance, which has been fine so far, although they have been extremely slow in getting the correct documentation to us.  We have heard some Tiny Home owners talk happily about Strategic Insurance Agency, so I think that would be a good option as well. 

Originally, we tried going with Geico RV insurance because we thought we would be able to get a discounted rate since our car insurance is through them as well, but after speaking with multiple agents it became clear that like most large insurance agencies, they
do not insure Tiny Homes yet because they are not entirely sure how to categorize them yet.  Hopefully this will change in the coming years and more competition in the space will lead to better insurance rates. 

Peaceful bedroom views

We know that this is not an exhaustive list of financing and insurance options, but this is everything that we found when we were making our decisions.  Hopefully having all of this information in one place will help the next person make an informed decision to go Tiny!