Many newlywed couples dream about buying a home together if they don’t already own one. Considering the cost of real estate, the idea of purchasing a tiny house might be appealing. Usually, a tiny home is under 400 square feet, and some are even built on trailers, providing you with a bit of mobility. It may also make top of the line finishes feel more affordable, as you aren’t dealing with nearly as much space as a typical house. However, even though it seems like a tiny house should be pretty affordable, that doesn’t mean one will always save you money. If you are considering a tiny home, here’s what you need to know.
Tiny Houses Aren’t Cheap
Since the homes are so small, it’s easy to assume that they’d be fairly cheap to buy. However, tiny houses can actually cost quite a bit, and some luxury versions can cost $150,000 or more.
Now, there are also less expensive models available. If you are open to lower-end finishes, a smaller home size, and fewer features, you can find options under $50,000. While that is far less than the cost of many traditional homes, that doesn’t mean it isn’t a big investment.
If you don’t plan on traveling with your tiny house, then you’ll also have to deal with additional expenses. For example, you’ll need to buy land for your tiny home. Additionally, you might have to bring utilities to your site if they aren’t already there, and that can be costly.
While you do have the option of renting a lot, that comes with its own drawbacks. For example, you don’t own the land, so you can’t permanently set up your tiny home. You could be asked to leave at any point (depending on your rental agreement), and transporting your house can be costly.
Utility Costs Are Usually Low
One of the biggest benefits of a tiny home is that it’s a fairly small space and is usually well-insulated. As a result, your heating and cooling bills are typically pretty manageable, allowing you to keep your monthly costs down. Plus, in most cases, you won’t have full-size appliances. Smaller versions of appliances are typically less expensive to run as well, and that can lower your utility bills.
Additionally, many tiny homes rely on alternative energy sources. For example, many tiny house owners have solar panels for electricity or use propane instead of natural gas or electricity. Some models might have wood stoves as an option for heat, reducing your utility costs further. Plus, you might have composting toilets, lowering your water needs.
Smaller Furniture Costs
It isn’t uncommon for tiny homes to essentially have all of your main furniture pieces built into the structure. A bed platform might be part of the design or, if you sleep in a loft area, might not be a factor. Shelves, drawers, and similar storage could also be integrated into the tiny home, so you won’t need to buy dressers or bookshelves.
Plus, since the space is small, you won’t have much space for additional furniture. You might be able to fit a couch in the living area along with a small table and chairs or desk in the main space. However, beyond that, you probably won’t have the room. As a result, you won’t feel like you need to buy anything else to fill out the space.
Less Space for Stuff
With a tiny home, space isn’t something you have in spades. Since your storage options are limited, you might be less inclined to make impulse purchases. Certain items might not be as appealing when finding a place for them is a challenge. This could lead you to spend less simply because you don’t want to overload your tiny home with stuff.
However, this also means you can’t benefit from shopping in bulk. You might not have room to hold a multi-month supply of non-perishable items, so you have to stick with smaller packages, and that isn’t always the best deal.
Financing is Challenging
In the vast majority of cases, you can’t use a traditional mortgage to buy a tiny house. If you aren’t paying in cash, then you’ll be stuck with financing options that can often be more expensive than a regular mortgage.
You might be able to use a recreational vehicle or travel trailer loan to fund a tiny house purchase, but it would have to qualify as an RV or trailer to be eligible. Depending on how it is constructed, that may not be an option.
Chattel mortgage and personal loans may also work. However, you won’t see interest rates here like you would on a regular mortgage. Instead, they’ll typically start at least a few percentage points higher, and they can easily cross the 10 percent line, and some may get close to 20 percent or more.
It’s also important to note that, if you don’t use a traditional mortgage, you can’t deduct the interest on your taxes. Personal, trailer, and recreational vehicle loans don’t qualify you for that benefit, and some may consider that to be a downside of going the tiny home route.
Depending on how your tiny house is built, you might have to jump through some hoops to insure it. If you buy one from a reputable builder and it’s on a foundation, then you might be able to get homeowner’s insurance to cover it. This can be fairly affordable, particularly since the property size tends to be small.
However, mobile tiny homes are usually categorized as RVs for insurance purposes. You’ll need to make sure you can get an RV certification to make the process easier and be prepared for a cost that might exceed what homeowner’s insurance on a similarly sized dwelling would look like.
Issues with Resale
While living in a tiny house might save you money while you call it home, you’re probably going to feel the pinch if you want to sell. Not only will you find a smaller buyer pool in comparison to traditional homes, but there are also financial issues. Anyone interested might not be able to use a mortgage to make the purchase, limiting your options further.
The situation is more challenging if you are just selling the house and not land as well. If you were renting a lot, the home probably has to be moved when you sell, and that might not be something that buyers want to take on.
Ultimately, a tiny home could save newlyweds money, but it also might not. In many cases, you might be better off purchasing a small house over a tiny home, if you genuinely want to own a single-family property. However, if you truly have your heart set on a tiny home, just make sure you understand the benefits and drawbacks. That way, you can make a financial plan and ensure that, in the long-run, you’ll actually come out ahead by going that direction.
Would you buy tiny houses to save money? Do you think tiny home living is a good way to save? Share your thoughts in the comments below.