Financing a small home can be different from financing a conventional house. The options available depend on the type of dwelling, whether you own the land, how the home is installed and your financial circumstances.
Start with the complete project cost
Before comparing loans, calculate the total amount you need to fund. Include the dwelling, land if applicable, site preparation, foundations, delivery, installation, approvals and utility connections. Allow for ongoing expenses and unexpected costs.
Finance options to investigate
Home loans
A standard home loan may be an option when the dwelling and property meet the lender’s requirements. Lenders can assess permanent dwellings, land ownership, building contracts and security differently. Confirm eligibility directly before assuming a home loan is available.
Construction loans
Some projects may qualify for construction finance, with funds released at agreed stages. Ask whether the lender accepts the type of dwelling, the supplier’s contract and the proposed installation method. Check progress-payment conditions and what happens if construction or delivery is delayed.
Personal loans
A personal loan may suit a smaller purchase or part of a project, but interest rates and repayment periods can differ substantially from home loans. Compare the annual percentage rate, establishment fees, ongoing fees and total amount repayable.
Using existing savings or equity
Savings may reduce borrowing needs. Some property owners may also investigate borrowing against existing property, subject to lender approval. Using home equity places the property used as security at risk if repayments cannot be maintained.
Supplier payment plans
Some suppliers offer staged payments or finance through a third party. Read the contract carefully and verify the lender, interest rate, fees, payment milestones, cancellation terms and refund arrangements. Do not assume a payment plan is interest-free.
Why the type of small home matters
- Granny flats: finance may depend on the existing property, approvals and whether the project is treated as a construction or renovation.
- Tiny homes on wheels: some lenders may treat these differently from permanent residential property, particularly if the home is not fixed to land.
- Modular and prefab homes: lenders may require approved plans, a suitable building contract, certification and an acceptable installation arrangement.
- Transportable homes: land ownership, site preparation, delivery and the dwelling’s classification can affect available finance.
Compare the true cost of borrowing
Do not compare finance options by monthly repayment alone. Review the interest rate, comparison rate where applicable, fees, loan term, repayment frequency, total interest, early repayment conditions and any required security.
- How much will you repay over the full loan term?
- Can you afford repayments if your income or expenses change?
- Is the interest rate fixed or variable?
- Are there fees for extra repayments, early payout or redraw?
- What assets are being used as security?
- Will you still have an emergency fund after paying the deposit?
Documents you may need
- Identification and evidence of income
- Details of existing debts, expenses and assets
- Land ownership or lease documents
- Supplier quotes and the proposed contract
- Plans, specifications and relevant approvals
- Site preparation, installation and connection estimates
Where to get reliable information
Compare offers from banks, credit unions and appropriately licensed lenders. Check relevant information from the Australian Securities and Investments Commission (ASIC) and MoneySmart, and consider speaking with a licensed mortgage broker or qualified financial adviser if you need help assessing your options.
Considering a Small-Home Project? Assess Feasibility First
Before committing to a tiny home, transportable home, modular dwelling or granny flat, consider whether your proposed project is financially and practically feasible.
Xpress Draft offers building feasibility services that may help you assess a proposed project before proceeding. This may be useful when you need a clearer understanding of the project’s potential costs and requirements.
If you are considering a small-home project, you can find out more about the service below.
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Before you apply
- Confirm the dwelling and project are suitable for the proposed property.
- Obtain a realistic, itemised estimate of the complete project cost.
- Ask lenders whether they will finance your specific dwelling type.
- Compare total borrowing costs and repayment risks.
- Read all loan and supplier documents before signing.
Small Home Options provides general information only, not personal financial or credit advice. Finance eligibility and lending terms vary by lender and individual circumstances. Verify all details directly with the lender and seek qualified advice where appropriate.