The attention for Tiny Houses is steadily growing as more people decide to go for this form of housing. One of the challenges they face is financing their small dream home. This especially plays a role if you have a temporary or no residential location yet, as the option of taking out a mortgage is then canceled. But, if you have found a permanent location – a lot that you buy – then a mortgage is certainly one of the financing options. Assuming you don’t have the money for the construction of your Tiny House in the bank or in your current home, how do you organize the financing of your Tiny House? I will list some options for you.
Taking out a mortgage for the construction of your Tiny House is, of course, an attractive idea in connection with the mortgage interest deduction, but it is not always possible. A requirement for taking out a mortgage for your Tiny House is that the house is attached permanently to the ground and an environmental permit for building has been issued. If you have a temporary residential location, it will be difficult to acquire a mortgage, depending on the duration of the housing project. But if you have your own lot or have a lot on long term lease, there certainly are some options.
There are several examples of Tiny Houses that are financed with a mortgage in the Netherlands. Rabobank has provided mortgages for Tiny Houses in Leeuwarden, Hardegarijp and Wouw (NB), for example. Other banks have also shown interest in financing Tiny Houses; as demand increases, it will become more common for Tiny House mortgages to be provided. So, if you think this is an interesting option, do not hesitate to talk to your bank. The more people do that, the sooner the possibilities expand. It is not even necessary to mention that it is a Tiny House. It is important to mention that it is a small, but fully-fledged home that complies with the 2012 Building Decree.
This Tiny House in Leeuwarden is financed with a mortgage. So it is possible!
If it is not possible to take out a mortgage, you can also think of a personal loan. Unfortunately, interest rates on personal loans are typically very high. For example, in 2015 I applied for a personal loan for the construction of my Tiny House, where I was told that I had to pay an interest of 8.5%. Fortunately, interest rates are currently lower. I have decided to look for another way. A personal loan is therefore not the most favorable option, but if you have no other option, it is nice that it is possible.
Borrowing from your network
This is a very interesting financing option, which is often used within the Tiny House movement and which also fits very well: borrowing money from your own network. How nice is it if you can bypass the bank and instead borrow the required amount from friends and family? This is called crowdfunding or crowdlending. Especially now that the interest rates on savings are zero and banks can even charge you a negative interest, it is very interesting for people with a filled savings account to invest in your project. You agree on an interest rate and term that you both feel good about and you lay down everything in a contract. A real win-win situation! I have financed most of my Tiny House this way and have only one year of repayments left. So, at this time next year, I will be 100% owner of my Tiny House and 100% debt free. How beautiful is that! In my online basic course, you will find more information and tips about using your network for your crowdlending campaign.
If your network is not that big, you can also borrow money from strangers. For example, through crowdlending (or crowdfunding) platforms such as Geld voor Elkaar.
Crowdfunding is a way in which projects can be financed by private individuals, through a crowdfunding platform. These are often projects that contribute something to society, and that aim for a good cause. Setting up a crowdfunding campaign takes quite a lot of time; don’t underestimate this. You have to study how it works and choose a crowdfunding platform that suits your project. You have to specify a target amount and most crowdfunding platforms only pay out when that target is reached, within a certain amount of time. You need to create a page with information, and it is highly recommended that you make a short video explaining what your project is about and what you will offer in return. See the video of my 2015 crowdfunding campaign below:
With crowdfunding you have to rely on your own network and less on strangers. Realize that you probably won’t be able to crowdfund the full amount for the construction of your Tiny House. But it can be a valuable addition to your funding, if you enjoy doing it.
With sponsorship you contact suppliers of building materials and installations and ask for a discount or in some cases free products or services. It is important with sponsorship that you have something to offer the sponsors, usually in the form of increasing their brand awareness and promoting the sponsor’s product. If you have a website and / or social media channels and thus manage to reach the target group of the sponsor, it is interesting for them to sponsor the construction of your Tiny House. If you also occasionally appear in the media, it helps in persuading sponsors.
I hope to have helped you on your way in the world of Tiny House financing options. Debt-free living is a wish of many (aspiring) Tiny House residents. Saving for your home is of course the best choice, but not everyone has that option. And if you at this moment have relatively high monthly living expenses, it might be worthwhile to take out a loan for your Tiny House and pay it off quickly instead of saving up for your house. Whichever way you do it, by living Tiny you choose a way of living that is good for you and the earth and that is what matters most.