What’s the Best Way to Pay For a Tiny House? A Tiny Mortgage or a Personal Loan?

A tiny home can help you achieve your dream of home ownership without the hefty price tag. The smaller size and simple design translate to a smaller footprint and lower costs. If you’re worried about how to afford one, there are personal loans and, in some cases, mortgages to help you achieve your dream of tiny homeownership.

Ready to Join the Tiny Home Movement?  

Tiny homes can be anything: an RV, a cabin, a converted bus, a trailer home, a container home, or even a shipping container. You can choose to build one yourself or have one built for you. And it isn’t uncommon to have a prefab or kit delivered to you.

You can find and order prefab and tiny home kits online through Amazon and from big-box retailers like Walmart and Home Depot, some of which can even cost under $10,000. Also, tiny home builders can design and construct one to your specifications.

The average tiny home kit is 100 to 400 square feet and costs between $30,000 and $60,000. The complexity of the kit determines the time it takes to build; simpler kits can take days, while more complicated ones can take longer.

Financing Options for a Tiny Home

Personal Loans

One of the best ways to finance the purchase of your tiny home is to use a personal loan. It allows you to borrow money to buy your tiny home and repay the lender over time with interest. Applying is easy, and most lenders can fund your loan in one business day after approval.

Repayment terms are flexible and can be shorter than a traditional mortgage. Keep in mind that many loans are unsecured, which means your interest rates will be higher. (The average rate for a 24-month personal loan in the first quarter of 2025 was 11.66%). You can get a lower interest rate if you:

You have various personal loan options that you can get through a bank, credit union, online lender, or peer-to-peer (P2P) platform.

Chattel Loans

Don’t count on a traditional mortgage to finance your tiny home. Lenders may have a minimum lending threshold that tiny home values don’t meet, and they generally require properties to be on permanent foundations.

However, you may get a chattel mortgage instead. Also called a chattel or manufactured loan, it is secured by movable personal property like an RV or other tiny home. There are a few key differences that set chattel mortgages apart from traditional mortgages, including:

• Ownership: A traditional mortgage lender only holds a lien on the property while the borrower retains ownership. Conversely, a chattel lender owns the property until you pay off the loan.
• Interest rates: Interest rates are usually higher for chattel loans versus traditional mortgages, meaning you’ll have higher monthly payments.
• Loan terms: Chattel loans usually have shorter repayment terms.
• Requirements: Traditional mortgages require appraisals and home inspections, whereas chattel mortgage lenders may not.

Keep in mind that the higher interest rates, coupled with fewer refinancing options, the lack of consumer protections, and the potential of repossession, make chattel mortgages very risky.

The Bottom Line

A tiny house can offer homebuyers an affordable path to home ownership, with financing through a personal loan or chattel mortgage. However, before buying a tiny home kit, be sure to do your research. Zoning laws and building codes can vary in different jurisdictions and impact the type of tiny home you purchase and where you place it.