Fact Alert: Most Tiny Home Owners Don’t Have a Mortgage
Buying a home can be expensive and many people are unable to pay cash to do so. In fact, it is very common for homeowners to have a mortgage. These loans can be large, with the average mortgage balance standing at $220,380 in 2021, according to data from Experian, a credit reporting agency.
Committing to a mortgage totaling hundreds of thousands of dollars can leave you with a large monthly payment and far less flexibility in what you can do with your hard-earned cash. But there is a group of people who may not have to worry about it: the small owners.
Most Tiny Home Owners Don’t Have a Mortgage
Although many homeowners need to take out loans to buy their homes, mortgages are much less common among people who own smaller homes rather than more traditional properties.
In fact, Comfy Living reports that 68% of people who live in tiny homes own them for free and without a loan on the property.
A small house is generally defined as a house under 400 square feet. Its smaller size means it costs less to build or buy. And current expenses are also much lower. Housing expenses could be as low as $600 per month, reports Comfy Living. This is one of the main reasons why 55% of tiny home owners have above average savings. Small, modest houses could be built for around $25,000, while those with a talent for DIY could create their own for around $12,000 to $35,000.
Housing costs tend to be a big monthly expense for most people after factoring in not just mortgage principal and interest, but also insurance, property taxes and utilities. With a tiny home, all of these costs are much lower, as are maintenance expenses and furniture purchases.
In other words, by downsizing their homes, small homeowners enjoy a much cheaper lifestyle than owners of standard properties.
Should You Consider a Tiny Home to Avoid a Mortgage?
Passing on a mortgage may sound very appealing, but living in a tiny house isn’t the right choice for everyone.
The most obvious downside is that you’ll have to make do with much less space than a typical home would. If you have a large family, value your privacy from your life companions, want space for your hobbies, or have lots of belongings to store, a tiny house may not be the way to go. -may not be the best option.
Some cities also have restrictive zoning laws that can make it difficult to find a place for your tiny home. And if your tiny home was once a mobile or manufactured home, some evidence suggests that these types of properties generally don’t enjoy the same level of property appreciation as traditional stick-built homes.
Ultimately, you’ll have to ask yourself if you can really be happy in less than 400 square feet, and if you can find a tiny house to live in (or land to build one in) in your preferred location.
If you decide you can’t afford such a small home, you can also research ways to make a mortgage on a traditional property more affordable, such as carefully researching interest rates with multiple mortgage lenders.
The Best Mortgage Lender in Ascent in 2022
Mortgage rates are rising – and fast. But they are still relatively low by historical standards. So if you want to take advantage of rates before they get too high, you’ll want to find a lender who can help you get the best rate possible.
This is where Better Mortgage comes in.
You can get pre-approved in as little as 3 minutes, without a credit check, and lock in your rate at any time. Another plus? They do not charge origination or lender fees (which can reach 2% of the loan amount for some lenders).
Read our free review
We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber holds positions at Citigroup. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.