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How to finance your tiny home

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Tiny homes offer freedom and flexibility, but it can be difficult to gage whether or not downsizing is financially the right move for you. Along with lifestyle changes, it’s important to know how you can best finance this move, be aware of the costs involved, and which home loans are available. Keep reading as we break down the process of purchasing a small property.

Why choose a tiny home?

Tiny homes have become increasingly popular in Australia. They are, as expected, tiny in size. They are typically comparable to the size of an RV or a caravan. Some are planted firmly on soil but most are built with wheels, enabling these homes to be mobile.

The tiny home movement is attractive amongst prospective home owners because it lifts a considerable financial burden from households as well as offering a minimalistic lifestyle. Particularly since in Australia's recent housing boom, tiny homes have become an affordable housing option for first home buyers.

Factors that will impact financing a tiny home:

Financing a tiny home can be tricky because of its smaller size. To qualify for a home loan you may need to meet extensive criteria.

  1. The home must be fixed and not portable in order to obtain bank finance.
  2. Every bank will treat it differently, and most lenders don't currently have clear guidelines on lending criteria when it comes to tiny homes.
  3. It's likely the lender will want a fixed price building contract (if you're building new), plans and a valuation to then consider if they have an appetite to lend for it.
  4. Another option for finance could be to borrow against your land if you have equity in it to finance your tiny home.
  5. Some lenders don't offer loans if a home is less than 50 square metres in size since it has limited resale potential


Can I get a home loan for a tiny home?

Due to the size and nature of the home, obtaining a standard mortgage is a lot harder as it doesn't appeal to the general market, and is specific to a certain type of buyer.

This results in increased selling periods and most lenders do not have the appetite to take security over property that will require a selling period of greater than 6 months. Usually, they would want at least the bedroom to be separate, which would rule out loft style bedrooms, a beautiful and space effective feature of many tiny homes.

Access equity from land - If you already own the land the home will be built on, you could do a valuation to see how much equity you have in the land, and whether it will be possible to increase your loan to fund the build.

Unsecured personal loan — If you go down this route, you must be aware that your repayments will be higher since it is a short term loan, typically between 1 and 7 years. Unsecured personal loans come with a higher interest rate compared to a home loan. If you intend to purchase another property in the near future, your borrowing power will be lowered until the personal loan is fully serviced and paid off.

Chattel mortgage — This is most similar to a car loan. Unlike an unsecured personal loan, a chattel mortgage uses your vehicle or tiny home as a form of asset. You gain ownership of the asset and pay off the loan usually between 2 to 5 years. Interest rates on chattel mortgages are typically lower.

Motorhome loan — If your tiny house sits on wheels, you could qualify for a motorhome loan. Repayments for a motorhome loan can span between 10 - 15 years. Most lenders will require a 20% deposit. Ensuring that your tiny home meets all safety and road requirements can improve your chances of being approved. Interest rates vary, they can depend on your credit score, the vehicle itself and the loan total.

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What are the costs of a tiny home?

trailer-park We've seen tiny homes built for as low as $7,000 but they can range up to $60,000+ on average, depending on the internal fitout. If you already own the land, you could do a valuation to see how much equity you have in the land, and whether it will be possible to increase your loan to fund the build.

Get an estimate of how much your tiny home would cost and potentially reduce the deposit on your loan to allow enough cash to pay for the build without a bank getting involved.

The costs of building or buying a tiny home can vary, just as they can vary with a standard home. Things you need to consider include:

  • the size of your prospective tiny home
  • the fitout of the home
  • whether it will rest on wheels, on stumps or a foundation
  • whether you build yourself or hire builders

Other costs you may want to keep in mind are annual registration fees and rental fees for land that offers electricity and water if you plan on living in a mobile tiny home. Since loans for tiny homes are generally for shorter terms, in the long run you may see yourself saving money.


Choosing to downsize and simplify your needs and expenses can be beneficial towards your lifestyle. The enthusiasm for smaller spaces and rise in demand of tiny homes can sometimes make it overwhelming to decide on whether they’re best suited to your needs. Chat to a Home Loan Specialist to discuss your options further.

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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