Financing Your Dream Tiny Home: All You Need To Know In 2023
House prices have risen dramatically in recent years. With NZ now ranked the sixth least affordable country to buy a house, it's no surprise that Kiwis are looking to tiny homes for their first buy. Yet not everyone has thousands of dollars in the bank ready to purchase, that's why we've put together this guide to explore affordable financing options.
How Much Does a Tiny House Cost?
The price of a tiny house can vary widely depending on factors such as size, materials, design complexity, and location. On average, you might expect to invest between NZ$40,000 to NZ$120,000 for a self-built tiny house, while professionally built options can range from NZ$80,000 to NZ$250,000.
Our tiny houses range from $93,407 (Snowdon) to $142,581 (Everest). Have a Look at our recent projects here. As the cost of materials constantly changes here in New Zealand, so prices also fluctuate accordingly.
Some ancillary costs need to be considered, such as power (mains vs solar), water tanks, groundworks (if needed), and greywater & wastewater systems (if required). These can vary based on each project, so it’s a good idea to do some further research to get more accurate info on all the costs involved.
What Financing Options Are Out There?
The road to financing your tiny house can seem overwhelming, but there are several avenues to explore:
a. Banks: If you’re using an existing piece of land or a property as security, some banks will loan out to help finance an additional dwelling. Check with your bank directly to see what options you have here. Generally, banks won’t lend out large amounts of money unsecured.
b. Peer-to-Peer Lending and Timebanks: Some platforms enable you to borrow from individual investors.
c. Tiny House Loans: Some lenders specialize in financing tiny houses, providing tailored solutions to suit your needs. See more on this below.
d. Crowdfunding: Engage your friends, family, or even the community to collectively fund your tiny house project.
Tiny House Financing
Bank said no? Although there may be more options out there. We’ve identified some key players who are there to help finance your tiny house without the need for a large amount of security or money upfront.
Squirrel, TMF Finance and Loan Smart can offer loans of up to $100,000 plus, with interest rates ranging between 9.15%pa to 15.95%pa based on your credit history, stability in employment & residence, asset backing, affordability and security valued offered. There are also personal loan options available with providers like Lending People.
Here’s The Gist
We talked directly with the providers above and asked them some key questions to get more clarity about what financing a tiny house on wheels invovles.
How much can I get? This varies based on each person’s situation and how much you can pay off. Squirrel sets a maximum lending of $100,000 with a 5% deposit on anything above $70,000. TMF finance can offer higher ammounts, but dependant on what you can afford to pay back.
How long does it take to get financing? If everything is in order you could be sorted within 2 weeks time from call to paperwork. The Lending People can stramline this even further and get your money sorted in days.
What are the interest rates? Interest rates range between 9.95%pa to 15.95%pa based on your credit history, stability in employment & residence, asset backing, affordability and security valued offered.
Do I need to own land or other assets? Although this isn’t necisarrily a hard requirement for all of the above lenders, your application will be favoured if you have some assets to offer as security.
Why Don’t Banks Give Mortgages on Tiny Homes?
So, banks usually give out mortgages by checking how much a property is worth. For instance, if a house and land are valued at $800,000, they might lend around 80% or even 90% of that value. Now, here’s the catch with tiny houses – they’re super easy to move.
Unlike regular homes, where banks can feel secure about their investment, tiny houses can be driven away by a single truck. Imagine a $50k to $200k asset just being taken off the property like that! So, banks get worried because they can’t be sure if the tiny house they funded today will still be there tomorrow.
Is Financing Right For Me?
We hope the above information gives you a better understanding of your financing options. Ultimately, it’s a big decision and requires a lot of consideration. The best piece of advice we’ve had around this is to spend at least 3 months living as if you’re servicing your finance. So, for example, if you have to pay $2,221 per month back to the financing company, how will this affect your lifestyle? It’s worth trying this out for a 3-month period to see if it suits you to give you the confidence to take the next step.
To Wrap It Up
As New Zealand grapples with soaring house prices, the allure of tiny homes has become a beacon of hope for those seeking an affordable path to homeownership. We hope this guide has been useful on your journey into the world of financing your dream tiny home. Drop us a line if we’ve missed something or if there are any further questions you’d like us to help answer.