Tiny House Living: How Much Money Can You Really Save?

Santana house in Portugal, tiny house
Tiny house living will affect your finances. | iStock/Getty Images

Maybe you can’t imagine being financially chained to one house for the rest of your life — or at least for the next 30 years it takes to pay it off. Perhaps you’re looking for a new adventure, or you want to practice minimalism in every way. You might have heard the rumors that living in a house the size of some people’s walk-in closets can save you tons of money. Whatever your motivations, you’re seriously considering leaving a traditional apartment or three-bedroom home in favor of a home on wheels or one that’s more like a typical shed than a fully outfitted house.
But how much money can you really save living in a tiny house? It’s trendy and chic, sure, and there’s plenty of other people taking the plunge too — even if they’re mostly found on HGTV shows. Still, there are some very real trade-offs to living in a tiny house that won’t be huge cost savers as well. Before you decide to part with your sentimental knick-knacks and put your dining room table up for sale, make sure you know exactly how much money you can save by going a non-traditional route.
You might be able to save a fortune, but you might also spend more money in budget categories you didn’t expect. Here’s a breakdown of the most common costs and savings of living in a tiny house.

The tiny house mortgage and up-front costs

Money in piggy bank and purchases on table. Closeup
Your mortgage probably will be smaller than the average American’s. | iStock.com/CentralITAlliance

The typical American home is about 2,600 square feet and the median sale price of homes in the United States is around $236,000, according to Zillow’s most recent estimates. Thirty-year mortgages offer a variety of interest rates, but that cost can grow by several hundred thousand dollars over the course of the mortgage, depending on how much you can afford for a down payment.
Tiny houses will typically have more costs up front, especially if you build one yourself. However, the overall cost is often much less than a typical house, or even apartment. Like any other home, the size and model of a tiny house varies, but often fall in the range of 100 to 400 square feet. If you build the tiny house yourself, the average cost is somewhere around $23,000, according to an infographic compiled by The Tiny Life.

Other costs

Small wooden house model in hand
You might have to purchase property, too. | iStock/Getty Images

There are, of course, some caveats. That $23,000 doesn’t include land, so unless you know a generous landowner who will allow you to squat on their property, you’ll likely need to pay additional money to buy a plot of land or lease some. That will be much less than buying land with a home on it already, but there will still be some charges involved.
With tiny houses, the budget is up to you as much as it is when you’re hunting for a traditional home. However, saving money on a tiny house often means doing a bulk of the work yourself. Some have built a full tiny house (that actually looks nice) for $8,000. If you’re not handy with a drill and purchase a tiny home that’s move-in ready, you’re likely looking at a price that’s more in the $60,000 range or more.
Still, many people are able to make smart financial decisions and avoid a mortgage altogether. About 68% of tiny house owners don’t have a mortgage at all, compared to just 29.3% of people in traditional homes who don’t pay a monthly fee for their homes.


woman in glasses looking up with light idea bulb
They’ll be cheaper than a typical home. | iStock.com/SIphotography

Another big area of savings for people with tiny homes can be utilities, though again there can be more up-front payments to see the savings over time. Fee Hacks points out that many appliances in a tiny home will use alternate forms of energy — like propane, solar energy, or composting — so you won’t be paying crazy electric or gas bills. Plus, if you make sure construction is done well, a smaller space is more likely to be more energy efficient.
A solar system even for a tiny house can cost around $8,000, The Financial Times reports. But afterward, utility costs can be in the $75-$100 range for everything. According to the Energy Information Administration (EIA), the average American electricity bill in 2013 was $110 on its own, not accounting for heat or other necessities.
In addition, most tiny houses use propane instead of natural gas, which is often cheaper. EIA data showed that propane was between 10 and 50 cents cheaper per gallon than natural gas, though that will vary based on where you live. Some people have gotten their propane bill down to less than $30 per month, but living in an area with colder winters could mean paying much more than that, or considering wood stoves or other options for heat during the most frigid months.

Downsized living

tiny house
Tiny houses obviously don’t have much storage space. | iStock/Getty Images

If you’re going from three bedrooms with a furnished living room, plus all the kitchen gadgets you still have from a wedding registry or post-college shopping spree, you’re likely going to be taking a hard look at downsizing the amount of stuff you own before moving it all into a tiny house.
As you continue to live in the smaller setting, that same mindset of minimalism will likely prevail. You won’t be bulking up your collection of abstract art or purchasing a new armchair — you simply won’t have the space for it. That might be a mindset change, but can often be friendly for your budget.


Kasita tiny house
It could mean more money in the bank. | Kasita

Tiny Living reports that 55% of people who live in tiny houses have more savings in the bank than the average American, with a median savings of $10,972. Considering most people couldn’t afford a $500 emergency, that’s a significant difference. On top of that, 89% of people living in tiny homes have less credit card debt than the average American. A whopping 65% of the demographic have zero credit card debt at all.
You could say that people who live in tiny houses were more likely to have financial mindsets that eschew debt in the first place, and that might be part of the explanation. However, it’s not hard to believe that living in a tiny space would also encourage you to make smart financial decisions about splurging on unnecessary items. If you don’t have space for five new pairs of shoes, you’re not going to buy them.

Other financial trade-offs

Small cabin, tiny house
Tiny houses allow for the purchase of higher quality materials. | iStock/Getty Images

While the mortgage, utilities, and fewer possessions represent most of the cost savings of owning a tiny house, there are some budget trade-offs you’re likely to make.
If you’re willing to save up some money, a tinier square footage means that high-quality and even fancy materials can become affordable. “In a tiny home, you’re able to use expensive, quality material that you may not have been able to use in a bigger home,” tiny home owner Ethan Waldman told The Financial Times. “But because of the scale of the house, these rich materials were affordable.”
While that can be an added luxury, you should expect to rework other budget line-items throughout the month. While you’re less likely to splurge on lots of items, the tiny space also means you can’t stock up on bulk items or save money by visiting warehouse clubs, WiseBread notes. Most tiny houses are also without a washer or dryer, meanings you’ll be spending extra time and money visiting a laundromat.
In addition, specialty items like composting toilets and other niche appliances can be more costly than typical versions. Many of them will end up being more efficient in the long run, but you’ll need to be prepared for the up-front hit to your budget. A final consideration is that you likely won’t have much space for entertaining, unless you own land along with your tiny home. That means you could be looking at going out to eat more often. While that isn’t always a budget-buster, it’s something to consider as you run the numbers on a potential tiny house of your own.

Follow Nikelle on Twitter and Facebook