Interest Rate Hikes: Addressing the Elephant in the Tiny HomeFeb 22, 2023
Interest Rate Hikes: Addressing the Elephant in the Tiny Home
Were you all set to buy a tiny home, but then interest rates went up, and now you're freaking out because you feel like your dream life has passed you by?
If that's you, this post will bring you comfort. Your cozy Teacup tiny home journey is not going to be buried by interest rate percentage points. Not on our watch!
That being said, we do want to acknowledge your feelings. After all, applying for tiny home financing can be nerve-wracking enough to give anyone pause- especially when you know that the rate you could have gotten a year ago is better than the rate you'll be offered today.
Still, every tiny home owner we've ever met has one thing in common: they believe that where there is a will, there is a way. And we’re here to help.
So read this post all the way through because we’ll be looking at actual numbers and reveal a tiny home financing hack that will decrease the interest you pay!
So, fact: tiny home interest rates have gone up. But are you ready for the good news?
If your concerns are financial, a tiny house still could be your best possible move! In fact, your biggest deterrent could be pointing directly at your greatest opportunity to live life on your terms.
Let's break this down.
Are you a millennial or maybe a member of Gen Z? Because if so, you are likely pretty smart. You know that the world can't keep going at its current pace.
But how are you supposed to craft a life of meaning without the time and money to do so?
Maybe you dream of taking a more relaxed position at work so you have the energy to spend your weekends hiking in the mountains instead of dreaming about it from the couch with yet another glass of pinot noir. Or maybe you want to have the money to actually travel with your partner instead of falling into wanderlust holes on Instagram.
If you're like most people, there are probably two things holding you back: time and money. And like most people, your time is probably spent at work to get money so you can spend that money on- you guessed it- housing.
This is why housing plays such an imperative role in the unfolding of our lives. It's quite literally the most powerful piece we can change to shape our futures.
And so whether you plan to raise children in a tiny house or buy a tiny house for retirement purposes, by taking control of your housing, you will be taking control of your life.
If you can get over the interest rate increase, that is.
So now, let's take a deeper look at some actual numbers. How much are the current rates going to affect you?
Here is a screenshot of a loan calculator provided by Bankrate.
In this scenario, you will be borrowing 100,000, so you can have the tiny home design upgrades your heart desires! (You had your eye on a farmhouse sink and an electric fireplace in the bedroom, didn't you?)
As you can see from the graphic, a 100k loan at 8% interest paid over the span of 15 years will give you a minimum payment of less than 1,000 dollars per month- yes, to live out your tiny home fantasy under your own roof!
This scenario has you paying just over 72k in interest over the life of the loan, but this is where you can apply a tiny home financing hack that will help you avoid a serious chunk of that interest, so here it is.
If you make additional payments (or partial payments!), you can reduce the amount of interest you pay.
Here's how this works.
Let's say you are willing to skip a couple of bar tabs each month or keep a closer eye on your Amazon purchases. You know, in order to say yes to a tiny house and dramatically change your life forever.
If you can put just $100 per month extra toward your payment, you won't pay interest on the additional portion. And if you use the numbers from the graphic above, that extra $100 per month will reduce your total interest paid over the life of the loan from $72,017 to $58,617.
But what if you can't pay the extra $100 every month? No worries. Additional payments are optional, so while you won't save as much if you skip them, you won't be punished either.
You can also make the payments on a different schedule. For instance, you could pay the minimum amount each month but make a lump sum payment once per year when you receive your tax return for similar benefits.
And if you do both? Now you're really pairing down that interest!
Here at Teacup, we know that money is important- after all, money represents energy.
That's why as you work through your tiny home interest rate calculations, you'll want to stay focused on the things your spent energy will bring you.
Our clients choose to buy a Teacup tiny home for all kinds of reasons, but here are a few.
- To enjoy locational flexibility
- To build a life around something other than consumerism
- To lower their carbon footprint
- To increase the peace in their lives
- To become homeowners
- To gain investment income
- To be close to family while maintaining their own space
And the most relevant one for today's post:
- To save money, so they can spend it on thriving instead of surviving
So let us ask you this: what would thriving look like to you?
Would it mean ending your workday at 4pm so you can enjoy dinner at the table with wine and without your phone? How about getting five or ten more quality years with your spouse because you were able to retire early?
Every single day, we get up and to go work in pursuit of surviving, but when we take control of our housing, we become empowered to expand and turn our attention to the pursuit of thriving.
So what do you think? Is the life you stand to gain worth a couple of percentage points?
Thanks for reading, and we hope to meet you on a Discovery Call soon!
Love our tiny home blog? Subscribe here!