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Are Tiny Homes Worth It? 5 Things to Know Before You Buy a Tiny House

Are Tiny Homes Worth It? 5 Things to Know Before You Buy a Tiny House
Casey Morris Editor

You’ve seen them on TV shows like “Tiny Home, Big Living” or “Tiny House Nation.” You’ve probably seen them on Instagram, too, photographed against bucolic landscapes or in picture-perfect communities.

Tiny homes, and tiny living, have generated a lot of buzz in recent years, a trend that’s only ramped up during the coronavirus pandemic. As Americans took stock of their lifestyles and priorities, the idea of paring down their belongings and living more simply took on both urgency and greater appeal.

But are tiny homes worth it? Intriguing as they are, tiny living isn’t for everyone – and it’s not without its obstacles. We break down the rewards and realities of tiny homes.

What's in this Article?

The call of tiny living
Tiny house pros
Tiny house cons and 5 challenges
The move toward tiny
Tiny mindset in a traditional home
Frequently asked questions

The call of tiny living

Tiny homes have been on America’s radar for some time now, but the coronavirus pandemic drove interest even higher.

Asked whether she’s seen an uptick in interest in tiny living, Lindsay Wood, outreach director for the Tiny Home Industry Association, gives “an empathetic ‘hell yeah.’”

Wood says tiny home manufacturers have been inundated with orders for new builds in the past two years.

“The only builders that aren’t backed up are the ones that are new to the market,” she says.

Wood attributes the long wait times on purchasing tiny homes to a shift in how people are approaching tiny houses. In the early days of the movement, many tiny home enthusiasts were interested in custom builds that they either constructed or designed themselves, often with reclaimed or upcycled materials.

But as more people enter the tiny home market, there’s a greater demand for factory-built models.

It’s not just Millennials and Gen Z who are opting for tiny living, either, Wood says. Tiny houses also appeal to retirees who want to downsize and free up their time and money.

“The same reason a Boomer doesn’t want a lot of land might be the same reason a Millennial doesn’t want a lot of land,” she says. “I want more experiences, not a bunch of land to take care of.”

A way to take control

Wood and her husband decided to purchase a tiny house in 2017 after confronting the competitive and high-cost Bay Area housing market.

They had been living in Marin County for seven years and spent more than $100,000 on rent.

“We had a great community, we were loving life, but we had no autonomy over our housing future,” Wood says.

Determined to find a place of their own, they started looking at houses but were wary of committing to a large mortgage.

“We could have bought a house, but then we’d be locked into a certain type of job,” she recalls.

Next up was the idea of purchasing land and building from the ground up.

But alas, “We got outbid on the land,” Wood says. “On land? There’s nothing on the land, but we’re getting outbid on it.”

That’s when they decided to buy a tiny house. Their house was finished in 2018, and they committed to the tiny lifestyle. Wood is now an advocate for codified building standards and legislation that will make tiny living accessible to more people.

Because while it’s a lifestyle with many benefits, there are a lot of hurdles for would-be tiny homeowners to clear to make it sustainable.

Opting out of the rat race and into a new lifestyle

Like Wood, Allison Shea and her former husband saw tiny living as a way to opt out of a high-priced housing market and gain more freedom in their lives.

The former couple moved to Seattle in 2014, where housing prices had begun skyrocketing.

“People were elbowing each other” for houses, Shea recalls. “$100,000, $200,000 over asking in cash was the norm. We ended up getting a total shoebox in Seattle for $350,000.”

Soon after, Shea found out she was pregnant with twins and had to leave her teaching job due to health issues. Once the twins were born, the costs of daycare would have canceled out her income, so she stayed home. Although her ex-husband earned good money from his job at Amazon, they quickly became fed up with the cost of living, including their $3,000-a-month mortgage.

“It just kept feeling like life was so hard, and we didn’t understand it because we were making what is a very decent wage in the United States,” Shea says.

Two years later, they’d had enough and decided to buy a tiny house through Tiny Heirloom, of the reality show “Tiny Luxury.” The home was built to suit the needs of their family, including allowing them to travel and spend more time with their kids.

Just as the family went on the road, Shea’s father passed away from throat cancer.

Shea says that having seen her father, a financial planner who had saved his whole life toward the plans he had for retirement, pass away before getting to experience them made her more sure than ever of her decision.

“That [affirmed] that I was on the right path and that you shouldn’t wait. You never know how many days you have on this planet, so you need to enjoy each day as though it’s your last,” Shea says. “I felt like I had this confirmation that, ‘Yes, you’re doing the right thing, even though it’s scary.’”

Tiny house pros and cons: The good, the bad & the downright difficult

Are tiny homes worth it? There are always trade-offs when buying any house or choosing any particular lifestyle, and tiny houses are no different. Let’s start with the upsides.

Tiny house living: The pros

There are a lot of benefits to tiny living, including:

Lower building costs: It typically costs less to buy a newly built tiny house, even a luxury one, than it does to build a brand new home on a foundation. But if your builder has delays or long waiting lists, you may end up waiting months or years for your tiny home to be finished. By contrast, you’d likely find a traditional home to buy much sooner

Lower purchase price: In general, tiny houses cost less to buy than traditional homes. However, the more luxury add-ons and customizations you include, the higher the price will go. You may find that you’re better off purchasing a site-built home if the price point on a tiny home you want gets high enough

Lower utility bills: Tiny homes are, by design, much smaller than traditional homes and will use less power and water. They can also be built with energy-efficient fixtures to further save money

Simpler lifestyle: This is a major draw for tiny home enthusiasts. Moving into a tiny house forces you to downsize your possessions, which can be liberating. Making do with less can allow you to save money, pay down debt, and feel free to focus on things like spending time with friends and family or developing hobbies rather than maintaining a costly lifestyle.

“Tiny homes can improve your lifestyle by giving you financial freedom from large mortgages and debt,” adds Dino DiNenna, a real estate broker in Hilton Head Island, S.C. “Moreover, because you can save a lot living in a tiny house, you can spend most of your time and money on outdoor activities.”

Less time spent on cleaning and maintenance: A smaller square footage means there’s less house to clean and maintain. And unless you buy a plot of land on which to park your tiny house, you don’t have to worry about lawn care and maintenance either

Ability to travel: If you’re able to save money with a tiny house purchase and you downsize your possessions, you can travel with your home, allowing you to see places that may have been on your bucket list for years. Tiny homes can open the gateway to an alternative lifestyle of frequent travel, especially if you’re a remote worker

“There are so many benefits. You really can’t put a price tag on it, because it really is a cool experience and you really do get to see what you’re capable of.”

Allison Shea, tiny home owner

Tiny house living: The cons and 5 challenges

For all the benefits, prospective tiny house owners face an uphill battle in a number of important areas.

Challenge #1: Getting a mortgage

Tiny houses are often cheaper than traditional houses, though not always by much. If you build it yourself with reclaimed, upcycled, or salvaged materials, you can save on labor and material costs, and people have shared videos of tiny houses they’ve built for under $20,000.

But if building the home yourself isn’t an option and you choose to buy one from a builder, costs can range significantly. You may be able to find models for $50,000-$80,000, but some can range to well above $100,000, especially if you choose to customize the build or upgrade the fixtures and amenities.

Unless you’re able to build a tiny house on a very small budget, or you have significant savings, you’ll likely need some kind of financing to buy the home.

And if the price tag on the tiny home you want gets high enough, you may discover that you’d prefer to buy a small, traditional home that’s not much higher in price and will be easier to purchase.

Many lenders do not offer mortgages for tiny homes – not because they don’t want to, but because they don’t have loan programs that allow for this type of purchase. Lenders often sell their mortgage loans to investors after they close, and investors tend to shy away from tiny homes.

“Some lenders are still unable to provide a loan and those that do may have additional restrictions on product types and are limited to shorter-term loans, meaning that the loan would have to paid back sooner than a traditional mortgage,” says Joe Pessolano, a branch sales manager with Fairway Independent Mortgage Corporation in Garner, N.C. (Fairway owns 

Why are mortgage lenders averse to tiny houses? A couple of reasons:

Property type

Even though tiny homes look and function like a standard house, they’re not classified as the same type of property. Tiny houses are considered similar to RVs, and there aren’t universal building standards for tiny houses yet. They’re typically not built on a foundation, either. All of this makes them riskier from a lending perspective and less attractive to investors.

Additionally, mortgage lenders must order an appraisal on a property to determine its value before they can lend on it.

“It can be hard to get a mortgage because they have to have a foundation and they are hard to appraise because you have to have comparable properties,” says Jodalee Tevault, a senior mortgage advisor with Fairway in Chandler, Ariz. “Appraisers are required to provide comparable properties in size, room count, and likeness, so unless you’re buying in a tiny home community, there may not be any homes to compare to.”

“Appraisers are required to provide comparable properties in size, room count, and likeness, so unless you’re buying in a tiny home community, there may not be any homes to compare to.”

Jodalee Tevault, senior mortgage advisor

In order to move forward with a loan, the lender needs an appraisal report based on three comparable properties within one mile of each other if you live in an urban or suburban area that have closed within the last year, according to Tevault.

“Without a solid appraisal, we cannot lend,” she says.  

Unique properties generally are often difficult to get a mortgage on because their uniqueness makes them more of a risk.

“If that lender has to take that home back in default, they might have a harder time re-selling the home just like an owner would,” Tevault says. “Unless tiny homes become more of the norm, financing them will be difficult.”

Loan amount

Mortgage lenders may also shy away from tiny home loans because of the loan amount. Small home loans are often more work for lenders, and they earn less for the work they put in. That’s why it’s harder to get a small loan even for a standard, foundation-built property.

“Traditional banks generally don’t provide mortgages for homes that cost less than $50,000, which means that your options are limited to locally-owned banks, credit unions, and online lenders,” says Zach Reece, a certified public accountant and owner and chief operating officer at Colony Roofers in Atlanta, Ga. “There are a few niche banks that provide loans specifically for tiny houses, but these are very rare.”

That’s not to say it never happens. Shea and her ex-husband received a 15-year mortgage from a credit union in Seattle when they purchased their tiny home for $135,000. It was the first time the credit union had done a loan for a tiny home, Shea says.

So, you may be able to find a lender willing to do a tiny home loan, but it will be more difficult than if you purchased a small, foundation-built house.

Tiny home builders often provide financing options, though the interest rate may not be as competitive as you’d find with a traditional mortgage lender.

One option is to get a personal loan. These loans are not tied to any property or collateral. They are simply a loan based on your creditworthiness. Generally, you have to have good credit and interest rates are higher than for mortgages. Still, they can be a solid option if you can’t find housing-specific financing.

“Unless tiny homes become more of the norm, financing them will be difficult.”

Jodalee Tevault, senior mortgage advisor

Challenge #2: Purchasing land for the tiny home

A common impulse among prospective tiny house owners is to purchase land on which to park the tiny home.

But that’s easier said than done.

“If I had $20 for everyone who says they want to buy land and put a tiny house on it…you and me, babe. You and me both,” Wood says.

There are a few obstacles to purchasing land for a tiny home, one of which is the cost. If you’re buying in a less densely populated area, you may be able to find an affordable piece of land.

But if you want to live near popular cities or even in-demand mountain or coastal areas, the cost of land can be quite high, as much or more than the tiny home itself in some cases.

Additionally, the property may need to be cleared, with road access and a driveway put in, along with hook-ups for water and sewage services, and those costs add up as well.

And while you may be planning to live off-grid with solar panels, a compost toilet, and a rainwater recycling system, the municipality where you live may not allow that. They may require the property to be on the local grid and water and sewage systems – assuming tiny homes are legal in that area.

“I think this is the main problem if you decide to live in a tiny house,” DiNenna says. “If you don’t have your own land, finding a location can be difficult because zoning and building codes may not allow tiny homes to be permanent.”

“If you don’t have your own land, finding a location can be difficult because zoning and building codes may not allow tiny homes to be permanent.”

Dino DiNenna, real estate broker

If you want to move to an area where tiny homes aren’t allowed, Shea recommends going to town municipal meetings and advocating for new legislation. Some cities have started allowing tiny houses, and new locales can adopt the same bylaws to allow tiny homeownership in their communities.

“It’s going to take legwork,” Shea says, but it’s possible. “There’s precedence now for other counties to do it, but people need to show up and be the voice.”

Challenge #3: Finding a place to park the tiny home

Many tiny homes are built with luxurious amenities – brand-new fixtures, quartz countertops, state-of-the-art appliances. But they’re still difficult to classify, which is why it can be tough to find a place to park them if you take them on the road.

Hitting the road is a big draw for many people, as they want the flexibility to travel easily with their tiny homes.

That was the case for Shea and her family, and she says the year they spent traveling with their tiny house was life-changing and profound. But it wasn’t without its challenges, especially when it came to finding places to park.

RV parks would seem the obvious place to park a tiny house you’re towing, but not all RV parks allow tiny homes.

“I would have to call ahead to like, 20 RV parks to get approval first, and the only reason we were able to get approval is that we were RVIA certified,” Shea says. “Lots of tiny houses aren’t RVIA certified, and the only way to get certified is to hire a builder that is RVIA certified.” (RVIA stands for RV Industry Association.)

Even with that designation, not all RV parks will approve tiny homes.

If you decide to take your tiny house traveling, be prepared to make these calls and study up on which places will let you park. It helps to have photos ready to send to the park’s coordinators to show the quality and appearance of your tiny house.

There are some tiny house communities where you can park your home, but Shea says those aren’t always a great solution. You may have little privacy if homes are parked closely together, and you may have to abide by strict rules similar to those of a homeowners association (HOA).

On the flipside, however, Wood notes that these communities can provide exactly the type of camaraderie many tiny house enthusiasts are searching for.

“That network of communities is what drives me,” she says.

When you do find a place to park, you’ll pay a monthly fee for the spot. That can range from a few hundred dollars to $1,000 or more, depending where you live.

Challenge #4: It’s difficult to buy a used tiny house

Shea says one of the biggest barriers to tiny home living becoming more widespread is the fact that it’s nearly impossible to get a loan for a used tiny home.

“The majority of people want to get into tiny living to save money, and now there are all of these used tiny homes on the market,” she says.

Buying a used tiny home could make this option more affordable, but because they’re difficult to appraise and there are so many uncertainties, there are very few options for financing the purchase of a used tiny home.

“It would enable so many more people to get into the market and into tiny home living than currently can get in,” Shea says.

That’s a huge difference from buying an older site-built home, as most people in the U.S. purchase homes that were built decades ago. Lenders are accustomed to giving loans for older homes, as long as they meet the appraisal requirements.

Challenge #5: You miss out on the equity you’d build in a traditional home

Home equity is a cornerstone of wealth creation in the U.S., which is why there is such a significant wealth gap between homeowners and renters.

With a tiny home, you would miss out on building equity in the way you would with a traditional home. Equity can be used to purchase future properties, consolidate debt, pay for children’s tuition, and many other wealth-generating purposes.

The move toward tiny

Tiny house living is not for the faint of heart, but advocates say it’s worth all of the challenges and work.

“There are so many benefits,” Shea says. “You really can’t put a price tag on it, because it really is a cool experience and you really do get to see what you’re capable of.”

And some of those challenges could come down in the coming years. Wood says that recent changes to zoning laws in California are making it easier for tiny home owners to find places to park there, and she expects California to set the tone for similar changes throughout the country.

She also sees tiny homes as a pathway to multigenerational living, as parents or grandparents can share a property with their relatives but still retain autonomy by living in a tiny house rather than everyone living under one roof.

The Tiny Home Industry Association is also working to establish building standards that will make it easier to appraise tiny home values and hopefully open doors to lenders offering mortgages on these homes, Wood says.

None of the changes will happen overnight, but as the demand for tiny house options – and affordable housing alternatives – continues, tiny houses could become more mainstream.

Tiny mindset in a traditional home

So, the question remains: Are tiny houses worth it?

Whether a tiny house is in your future depends on your goals and personality, as Shea says tiny home living requires a flexible and optimistic mindset, as unique situations pop up all the time.

“You’ve got to be kind of a gray area, the world is my oyster, I make my own reality kind of thinker,” she says. “You’ve got to be able to problem solve.”

“You’ve got to be kind of a gray area, the world is my oyster, I make my own reality kind of thinker. You’ve got to be able to problem solve.”

Allison Shea , tiny home owner

If you’re not comfortable with ambiguity and uncertainty, you may not be happy with a tiny house. And living in such a small space isn’t for everyone – or forever.

Since her divorce, Shea has moved out of the tiny house, but she says the mindset shift she had while living in it has remained.

Even if you decide to buy a traditional home, you can embody some of the values of the tiny home community in whatever house you choose to purchase.

“You don’t have to painstakingly live in an eight-foot-wide home if that is unbearable,” Shea says. “I think as long as you have a mindset of, ‘I want to live more simply, I want to minimize, I don’t need so much stuff,’ but for whatever reason you do need more space … as long as you’re making sure you have exactly what you need and no more, you’re a part of the solution. Just start to think differently and be part of the solution.”

Are tiny houses worth it? FAQs

Why are tiny homes a bad idea?

Tiny houses aren’t necessarily a bad idea. They offer a lot of lifestyle benefits, including lower costs, less property to manage, the opportunity to downsize and simplify, and the flexibility to travel. But there are a lot of logistical challenges, including finding a place to park your tiny house, and it can be quite difficult to get a traditional mortgage for a tiny house.

Are tiny houses really worth it?

Tiny houses can be worth it depending on your goals. If you want to downsize and travel more frequently, not to mention save money on monthly housing costs, they can be a great option. But if you want to build equity in a property or purchase a home to grow into, a tiny house probably won’t be the right move for you.

What are some disadvantages of living in a tiny house?

It can be hard to get a traditional mortgage for a tiny house, and you may face challenges finding somewhere to park the home. The limited space means you’ll need to downsize your possessions and potentially have to make do with a lot less than you’re used to. You may also find the size limiting if you plan to have a large family or enjoy hosting large groups of family and friends, says real estate broker Dino DiNenna.

*Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.

Further Reading

Fairway Advantage Pre-Approval is the Key to a New Home

$15k First-time Homebuyer Tax Credit 2021: All Your Questions Answered