Even with the spike in tiny house purchasing across the United States, the process of financing and securing insurance for said homes is still misunderstood.
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. 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:
- Does the loan require a permanent foundation?
- Is there a square footage requirement?
- What are the minimum and maximum amounts for financing?
These loans are typically unsecured, meaning the bank doesn’t hold anything for collateral. A personal loan has an annual percentage rate between 3-36%, with good credit. Personal loans usually have a length of seven years to pay off.
Some builders can offer in-house financing for tiny homes.
In-house financing is done through a builder’s partnership with a third-party lender, so requirements and qualifications will vary.
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.
RV loan 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.
Financial Company Options
Estimated APR 6.34% – 35.89%
Loan Amount $1,000 – $40,000
Minimum Credit Score 600
Estimated APR 6.99% – 22.28%
Loan Amount $5,000 – $100,000
Minimum Credit Score 680
Estimated APR 4.99% – 19.99%
Loan Amount $5,000 – $100,000
Minimum Credit Score 660
Operation Tiny Home
Operation Tiny House 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
- Law Enforcement
- Fire Fighter
- Pre-K – 12th Grade Teachers
- Lives in an area affected by hurricane, wildfire, flooding, or other natural disasters
- Aging out of Foster Care
It is essential to secure proper insurance on a tiny house like any home.
Natural disasters and other tragedies (fire, flood, vandalism, etc.) are always a possibility, it’s essential to make sure the investment is covered.
There are a few options to obtain 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:
- Uninsured Motorist
- Personal Property
- 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
- 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.
Insurance Specialists 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 Group
American Modern Insurance Group offers tiny home insurance as part of its manufactured home policies. They generally cover liability, personal property, water damage, and more.
American Family Insurance
American Family Insurance covers everything someone would need insurance for – life, business, homeowners, and auto. AFI 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.
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 tiny 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).
If the tiny home will be an investment property, such as an Airbnb, Liberty Mutual is a great option to look into, with options for 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.
Taking the Next Steps
At Turn Key Fabrications, our passion is helping you customize your tiny home, and that includes financing and insurance.
Contact us today, and let’s get started!