Most Small Homeowners Don’t Have a Mortgage
Not having a mortgage sounds appealing, but is a tiny house right for you?
- Tiny houses are usually less than 400 square feet.
- They are a popular trend with people who want to save money.
- Many 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’s a group of people who might not have to worry about that: smallholders.
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 major 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.
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