How Do You Get a Mortgage on a Tiny Home?
Tiny homes have surged in popularity, offering a minimalist, affordable lifestyle with a lighter environmental footprint. For first home buyers or those looking to downsize, they can be an attractive option. But when it comes to financing your dream, things can get a little... complicated.
Why Don’t Banks Like Lending on Tiny Homes?
The main challenge with getting a mortgage for a tiny home comes down to how banks assess risk. Mortgages are approved based on the value of the security—usually a house fixed to land. A tiny home, particularly one on wheels, is inherently portable. That means a bank has no assurance that the structure it’s lending against will still be there if something goes wrong. One flatbed truck is all it takes to remove what may have been a $100,000 asset.
Banks are risk-averse, and a tiny home doesn’t provide the same level of security as a traditional home on a foundation.
But Garages Are Moveable—Why Will Banks Finance Them?
It’s a fair point. Garages could be removed too, but there are two key differences. First, garages are generally built on concrete slabs, making them harder to move. Second, they’re considered permanent structures, usually listed on the property’s title and included in the property valuation.
Tiny homes, especially those on trailers, are designed to be mobile. Even if you attach one to a concrete pad, banks are unlikely to see it as sufficiently permanent or broadly desirable to resell.
Could Attaching a Tiny Home to a Foundation Help?
While connecting your tiny house to plumbing and a foundation could reduce its mobility, it still may not be enough. Banks tend to view tiny homes the same way they view apartments under 40 square metres—hard to resell, appealing to a limited market, and therefore higher risk. For this reason, even if it’s fixed to the land, a tiny home might not meet a bank’s lending criteria.
So How Can You Finance a Tiny Home?
There are a few ways to finance a tiny home, but a traditional mortgage probably won’t be one of them. Instead, you’ll need to look at alternative strategies—either using existing equity in your land or applying for a personal loan.
Using Equity in Your Section
If you already own land, the bank may allow you to increase your mortgage based on the value of the section. For example:
Your land is valued at $500,000
You owe $300,000 on your mortgage (60% LVR)
The bank may let you borrow up to $400,000 (80% LVR), freeing up $100,000
This money could then be used to buy a tiny home. The bank is comfortable with this because even if the home is moved, the loan remains within acceptable lending limits on the section.
Taking Out a Personal Loan
Personal loans are another route to finance your tiny house. They come with a few trade-offs:
Higher interest rates (typically 7%–9%)
Shorter loan terms, usually around 5–7 years
Unsecured, or only lightly secured lending
This can be a faster way to access funds if you don’t yet have sufficient equity in land, but you’ll need to budget for the higher repayments.
Can You Use Both?
Yes. It’s possible to top up your mortgage using your land’s equity and then cover the remaining cost with a personal loan. Your mortgage broker can help structure the combined repayments to ensure it’s manageable within your income and expenses.
Can You Use the First Home Grant for a Tiny House?
In some situations, yes. If you’re buying a section and planning to live in the tiny home as your main residence, you may be eligible for the First Home Grant. The grant applies to land purchases and can cover up to $10,000 per eligible person. However, you’ll need a signed build contract for the tiny home to demonstrate that the total cost of the land and build falls within the regional price caps.
You’ll also need to meet other eligibility requirements, such as income limits and minimum KiwiSaver contributions. Speak to your solicitor and mortgage adviser early to make sure everything lines up.
Will Banks Eventually Warm Up to Tiny Homes?
It’s possible—but not likely in the short term. The issue isn’t just about popularity; it’s about security for the loan. Tiny homes remain tricky to finance because of their mobility and limited market appeal. Until they’re considered mainstream housing stock—complete with titles, fixed foundations, and standard valuations—banks are unlikely to offer mortgage-level lending.
However, you can still work towards your tiny home goals by investing in land and allowing it to appreciate in value. Over time, increased equity could give you the financial flexibility to add your tiny home without needing a traditional mortgage at all.
Tiny House Living: Finance First, Then Freedom
While the road to financing a tiny home may not be straightforward, it’s far from a dead end. With some smart planning—whether through leveraging equity or using a personal loan—you can still make the dream a reality. The key is to treat it like any other property purchase: get expert advice, understand your numbers, and have a plan for how to fund it sustainably.
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