Tiny House: How small would you downsize to live mortgage-free?

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This topic contains 2 replies, has 3 voices, and was last updated by  Veronica Combs 4 years, 3 months ago.

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  • #1172 Reply

    The Tiny House movement has been gathering steam in the U.S. over the past few years, partly for sustainability reasons, partly due to homeowners’ desire to simplify, but and also in response to a stubbornly tough economy.

    When we consider that most Americans spend anywhere from one third to one half of their monthly income on housing, and that a typical single family home can cost over one million dollars over 30 years, it’s easy to understand this growing interest in a radically small and dramatically more affordable housing alternative.

    As SUM180’s CEO Carla Dearing has explained in a recent post, owning a home is one of the best ways to strengthen your financial picture. According to Carla, every mortgage payment you make is really a form of savings because it increases the amount of your home that you own (your “equity”). But members of the Tiny House movement have identified another way to “save” – by reducing the amount of house that they buy in the first place, they are reducing and even eliminating mortgage payments altogether.

    10-13-2015 5-16-25 PM

    Photo: Dwell

    It’s a fascinating option for sure – personally, I could look at pictures of tiny houses online for hours and daydream about a radically simpler life. But is this alternative legitimate from a financial planning standpoint? Well, consider the following:

    • On average, a tiny house costs only $23,000 if built by the owner. (By comparison, a standard house costs $272,000; when you factor in the interest on a 4.25% home loan, the total jumps to over $480,000.)
    • 78% of tiny house residents own their home, compared to 65% of homeowners with traditional house
    • 68% of tiny house owners have no mortgage, compared to 29.3% of all U.S. homeowners.
    • 55% of tiny house owners reportedly have more savings than the average American, with a median of $10,972 in the bank.
    • 89% of tiny house residents have less credit card debt than the average American, with 65% of tiny house residents having zero credit card debt.

    Source: The Tiny Life

    These financial benefits are great, but naturally, there’s a tradeoff: space. Whereas the typical American home is around 2,600 square feet, the typical tiny house measures between 100 and 400 square feet. That’s smaller than the micro-apartment I had in Mountain View two decades ago, which was too small for a full size refrigerator or kitchen sink. (I had to wash my cook pots in the shower stall.) Today, in the midst of a divorce, I’m shedding a lot of my stuff as I relocate from a house to an apartment (downsizing everything from my closet to my library to furniture) – but I’m not ready to cut all the way to the bone on personal possessions just yet. A tiny house purge still feels a bit too radical for me.

    That said, one thing that I personally find intriguing about the tiny house option is the idea that we can give up space without necessarily feeling deprived. Tiny house fans will tell you how liberating it is to live simply. And besides, tiny houses are available in a range of finish levels and price points – so giving up square footage doesn’t necessarily mean giving up every luxury.

    Do you find the financial freedom associated with a tiny house appealing? Do you think you could handle the lifestyle adjustment of moving into a tiny house? I’d love to know what you think!

    A couple with little or no construction experience built this 236 square foot home for $50,000.

    A couple with little or no construction experience built this 236 square foot home for $50,000. Wow!

    #1230 Reply

    VC

    My kids are still in elementary school, but my husband and I are already thinking about how we are going to downsize. I think the biggest problem for most people is thinking about stuff. How do you get rid of enough of it to be happy and have all your stuff fit in a much smaller space?

    For me, location is more important than size. I want to live in a place where I can walk to the library, the grocery, a park and a wine store. I would be willing to go under 800 feet to get the right location.

    #1287 Reply

    My kids are still in elementary school, but my husband and I are already thinking about how we are going to downsize. I think the biggest problem for most people is thinking about stuff. How do you get rid of enough of it to be happy and have all your stuff fit in a much smaller space?

    For me, location is more important than size. I want to live in a place where I can walk to the library, the grocery, a park and a wine store. I would be willing to go under 800 feet to get the right location.

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