FINANCING AND INSURANCE
Even with the spike in tiny house purchasing across the United States, finding financing and insurance can still be tricky, but is 100% possible.
Since tiny homes are between 100 sq ft and 600 sq ft, there are some options that aren’t available to a typical stick-built home, which can be a benefit. Locating financing and insurance is a step that you won’t want to skip when looking into investing in a tiny home, along with researching the builder.
Financing Options Broken Down
A traditional 30-year mortgage is unlikely for a tiny home since they generally cost between $30,000 and $80,000, so they don’t make the cut-off. The best avenues to research are looking into a personal loan, a home equity loan if this is a secondary residence or investment property, or financing through a lender partnered with a tiny house builder.
It’s important to ask questions about what the lender will require when researching which loan is best.
Do they require a permanent foundation?
Is there a square footage requirement?
What are the minimum and maximum amounts for financing?
PERSONAL LOAN
Personal loans are very common to use when getting financing for a tiny home.
They are typically unsecured, meaning the bank doesn’t hold anything for collateral. A personal loan has an annual percentage rate between 3% to 36%, and good credit is required. Personal loans usually have a length of seven years to pay off. Payments will be higher due to the shorter amount of time on the loan.
Builder Financing
Some builders can offer in-house financing for tiny homes. This is generally done through a partnership that the builder and a lender have.
RV Loans
Purchasing a THOW (Tiny Home on Wheels) opens up the option of an RV loan since it won’t be placed on a permanent foundation and can be moved around. The Tiny Home will need to pass an inspection to prove it meets the standards set by the U.S. Department of Transportation’s National Highway Traffic Safety Administration and get an RVIA tag (Recreation Vehicle Industry Association).
One benefit of an RV loan is that they are often financed for 20-30 years so that the payment will be smaller than a personal loan. The rates are also lower, usually around 4%-8%. A con of this type of loan is that the tiny home will be used as collateral for the loan, so if it is defaulted on, the tiny home can be repossessed.
Finacial Company Options
Lending Club
Estimated APR 6.34% – 35.89%
Loan Amount $1,000 – $40,000
Minimum Credit Score 400
SoFi
Estimated APR 6.99% – 22.28%
Loan Amount $5,000 – $100,000
Minimum Credit Score 680
LightStream
Estimated APR 6.34% – 35.89%
Loan Amount $1,000 – $40,000
Minimum Credit Score 400
Operation Tiny Home
This is a matching grant program, which could be up to $12,000 of the down payment.
To qualify, someone in the house must be a community hero or struggling with hardship. Check with Operation Tiny Home to see if qualifications are met or get on the waitlist for the next round of grants.
Examples of past Grant Qualification Includes:
Military / Veteran Status
Pro -K- 12th Grade Teachers
Low Enforcement
Lives in an area affected by hurricane, wildfire, flooding, or other natural disasters
Fire Fighter
Aging out of Faster Care
Many more! Check out their website for a complete list.
Insurance
Like any home, it is important to secure proper insurance on a tiny house. Natural disasters and other tragedies (fire, flood, vandalism, etc.), so it’s important to make sure the investment is covered.
There are a few options to obtain insurance.
RV Insurance
If financing the tiny home via an RV loan, this would be the best bet for getting insurance. RV Insurance is also great if your tiny home is on wheels and will be moved frequently. Extra insurance coverage that is included with RV that isn’t from traditional insurance are: collision. comprehensive, liability, uninsured motorist, personal property and medical payment
Mobile Home Policies
Mobile Home Insurance is an excellent option if the home will be on a foundation or rarely moved. A comprehensive mobile home insurance policy, similar to homeowners insurance, will cover: the home, personal property and liability claims.
If this route is taken, get a transit endorsement, so the tiny home is covered while transported.
Tiny House Insurance Specialists
With the tiny home boom that keeps growing, we will likely see more and more tiny house insurance specialists come on board. These companies usually offer coverage for traditional and alternative living structures, such as off-grid cabins, micro homes, storage containers, and Tiny Homes.
Insurance Company Options
American Modern Insurance
American Modern Insurance Group offers tiny home insurance as part of its manufactured home polices. They generally cover liability, personal propery, water damage, and more.
American Family Insurance
American Family Insurance covers everything someone would need insurance for – life, business, homeowners and auto. They can help find the right category for insurance coverage on your tiny home with their different policy types, including RV insurance and manufactured home coverage
State Farm
If the tiny home is in the purchaser’s backyard. State Farm is an excellent option. They can add coverage with standard homeowners insurance and list it as a detached dwelling.
Foremost Insurance Group
Foremost offers specific coverage for tiny homes for full-time home dwellers. Insurance is available through its Travel Trailer Program if the tiny house meets RVIA standards or is certified by NOAH (National Organization for Alternative Housing). They also have a specialty dwelling program covering tiny homes on a permanent foundation and is for personal use.
Liberty Mutual
If the tiny home will be an investment property, such as an Airbnb. Liberty Mutuual is a great option to look into. They offer short-term rental coverage as well as mobile home insurance. Liberty Mutual builds the insurance policies to fit each individual’s needs so that you can add on to the policy as necessary.