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How to Switch Banks in 5 Simple Steps

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Throughout the years, banks have evolved, grown, and changed. Before there was easy access to the internet, smartphones and their different mobile apps, people had to visit a brick-and-mortar bank to make any financial transactions. It was crucial to choose a bank that was within close proximity to your home or work, and build strong relationships with the teller and bankers. However, as online banking emerged onto the scene, it revolutionized the traditional banking system and now gives consumers so many additional options when it comes to choosing a bank.

It may seem like all banks are the same at the core — they are a safe and secure place to store your money. However, not all financial institutions are created equal. While brick-and-mortar banks still exist, online banks are becoming more competitive, offering better rates and lower fees.

If you’re considering switching banks but don’t how to start the process, this article will walk you through all the things you need to do in order to change banks.

Why switch banks?

To get a break on fees. People switch banks for a variety of reasons. Depending on your bank, you may be paying unnecessary fees for their banking services.

“If your current bank is hitting you with various feesmonthly maintenance fees, minimum balances or ATM feesit could be a motivating factor to switch to a bank with fewer fees,” said Ken Tumin the founder of DepositAccounts.com, which like MagnifyMoney is owned by LendingTree.

To earn a higher yield. Another reason to change banks is to get a higher interest rate on your checking or savings account.

“If you keep an average of $1,000 or less in your checking account, interest rates aren’t going to impact you too much,” said Tumin. “But, if your checking account balance is $20,000, for example, the higher interest rate should be much more of a consideration.”

No matter your reason for switching banks, you can do it fairly easily. We’ll look at how to find a better bank toward the end of this article, but first, let’s go through how to change banks, step by step.

How to switch banks in 5 steps

#1 Shop and compare banks to find the best fit

Sites like MagnifyMoney make it super easy to compare and contrast different banks and weigh their pros and cons. Here are the key features of any bank you should consider before making the switch.

Look for no monthly fee. Many banks offer free checking accounts with no monthly maintenance fee. While some banks offer easy ways to waive the monthly fee, free checking is preferred.

“Big banks make it easy to waive the fee by having direct deposit or by maintaining a minimum balance, but if you lose/switch jobs and don’t have direct deposit or your balance dips, it can be hard to maintain and that’s not a time to worry about monthly fees,” Tumin said. “You’d be better off with free checking and so you don’t have to worry about a monthly fee.”

Then check out their other fees. Banks can charge a variety of monthly or annual fees. These can include monthly maintenance fees, minimum balance fees, foreign transaction fees or ATM fees, just to name a few. While fees may be unavoidable, choose a bank that offers the most benefits and has the least amount of fees.

High rates on checking, savings and CDs bode well.  If you’re looking to deposit a significant amount of money into your checking and savings account or you want access to high yield CDs, you’ll want to choose a bank that offers high rates.  Currently, good rates for a checking account range from 0.40% to 2.02%, depending on the minimum balance. Good rates for a savings account range from 2.10% to 2.45% on average.

Convenience. Larger banks are likely to have more ATM and branch locations. When choosing a new bank, look at your location and make sure you’re picking a bank that is accessible to you based on your location. If you don’t care for a brick-and-mortar location, there are many online banks to consider. While online banks don’t have a physical branch to visit, they have a wide network of ATMs which are easily accessible and convenient for their customers. Some online banks may even reimburse ATM fees.

Check out the bank’s technology: In today’s fast-paced world, mobile and online accessibility is important to many people. When you’re considering switching to a new bank, check out the tech capabilities of your new bank, and see if they have a mobile app for easy use and access to your account.

FDIC or NCUA insurance. It may seem like a no-brainer, but you’ll want to guarantee that your new bank is either insured by the Federal Deposit Insurance Corporation (FDIC), or by the National Credit Union Administration (NCUA). These institutions ensure that your money is protected.

Because your money and finances are so important, it’s essential to be happy with your bank. If you’re unhappy and have been considering changing banks, feel confident that can find a new bank and make the change in a few easy steps.

#2 Find out your current bank’s account closure process

Before you leave your current bank, you’ll want to inquire about the process to close an existing account. Each bank does things differently, so you’ll want to make sure you’re following the right procedure to close your account properly. Also, you’ll want to do some research on the bank you’re considering switching to so you know you’re making the right decision, (more to come on that note).

#3 Make a list of bills and accounts linked to your current bank account

Give yourself some time before switching banks to make a list of all payments, deposits, and services currently connected to your account. This could include:

  • Direct deposits
  • Monthly bills
  • Monthly transfers
  • Services like PayPal, Venmo, or Apple Pay
  • Checks

Take a look at your bank statements for the last year and highlight all recurring charges. From there, you’ll know exactly which services you’ll need to transfer to your new bank moving forward. Redirecting all your payments and transfers may take some time and coordination, so make sure you give yourself plenty of time.

“Open a new account, slowly migrate over and eventually close the original account,” Tumin advises. “The only reason to rush is if you’re trying to avoid fees.”

#4 Open your new account

Once you’ve found the new financial institution you’d like to bank with, you can start the paperwork and open your new checking or savings account. When choosing between a checking and savings account or money market, assess your short-term and long-term needs.

Checking accounts are best suited for liquid funds, or money you need access to quickly and easily. Nowadays, you can get fairly competitive rates on your checking accounts and earn a little bit of money on your checking account. Check out MagnifyMoney’s 2019 roundup of the best high yield checking accounts.

Savings accounts are a good place to store your rainy day money and your emergency savings. You can access them frequently without fees, but they often offer higher rates compared to checking accounts. You can compare options here.

After you’ve decided whether you’ll open a checking or savings account, or both, you’ll want to transfer money into the new account, wait for it to clear, then start setting up your recurring payments, deposits and transfers with the new bank.

Because mistakes and oversights can happen, it’s smart to keep your old account open for a period of time to ensure everything transferred smoothly.

“It’s important to realize you don’t have to have just one bank account. You can open a new account and keep your current one. There is no rush to close a current account if you don’t have a monthly fee,” Tumin said.

Taking your time can help you avoid mistakes and make the transition smoother.

#5 Close that old account

Once you’ve finalized everything with the transfer, automatic payments have been set up, and bills have cleared using the new account, it’s time to close your old account. Work with your bank to ensure the account is officially closed and all the paperwork is finalized.

You may want to monitor your old account for a few months, even up to a year to ensure your old account doesn’t return from the dead and become a zombie account. A zombie account is an old account that is reopened by the bank and the account holder may not be aware of it.

This can happen if you forgot about a one-time or recurring payment and didn’t re-route it to your new account when changing banks. If that payment goes through your old account, the bank will reopen your dead account, which can result in overdraft fees or other unnecessary charges you’d likely wish to avoid. To avoid an unintentional zombie account, monitor activity on your old account for months after transferring to ensure everything was squared away during the transition.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sage Evans
Sage Evans |

Sage Evans is a writer at MagnifyMoney. You can email Sage here

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Banking

How Important Is It to Have a Rainy Day Fund?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

rainy day fund
Be prepared for the unexpected with a rainy day fund.

Life is unpredictable, which is why a rainy day fund is one of the most important components of a sound financial foundation. Even the most prepared, organized people can be caught off guard and put into a difficult financial situation when the unexpected arises. Because of this, it’s essential to have money tucked away in an emergency fund and a rainy day fund. While most people would agree that having easy-to-access cash is important, 29% of households have less than $1,000 in savings, according to a recent MagnifyMoney study.

In this post, we’ll explain exactly what a rainy day fund is, how much you should save and how to start one today.

What is a rainy day fund?

Rainy day fundEmergency fund
Money set aside for predictable expenses, like a roof repair or trip to the mechanic. Money set aside for unpredictable, and unplanned for expenses such as job loss, divorce or a sudden change in income.

Often, the terms rainy day fund and emergency fund are used interchangeably. While they are both savings accounts that can be used to pay for the unexpected, they differ in a few key areas. It’s important to learn the difference between the two types of savings accounts and contribute to both.

A rainy day fund is a designated amount of money that has been set aside for one-off expenses that you can typically predict the need to pay for at some point. Rainy day funds should be easily accessible and used to cover expenses that fall outside of your normal budget. This fund can be used to pay for things like car or house repairs, broken appliances, additional taxes, children’s field-trip fees, or last-minute travel expenses. While these expenses are usually not part of your monthly budget, you could likely anticipate the need to pay for them once or twice a year. So, a rainy day fund comes in handy.

“The number one reason to have a rainy day fund is peace of mind,” said Corbin T. Green a financial advisor in Salt Lake City. “People are able to go to bed knowing that if something were to happen, there are funds available to take care of that.”

This fund allows you to pay for smaller, one-off expenses without going into debt or pulling from your checking account and throwing off your well-planned budget that is used to pay for predictable monthly bills and expenses.

An emergency fund is exactly what it sounds like—a reserve of money or savings account that you can quickly access in case of an unexpected and unplanned life emergency. Typically, emergency funds are used to pay for unexpected, longer-term events such as medical bills, job loss or divorce.

“If something were to happen where you got laid off, left a job or got injured, having an emergency fund protects you and buys some time,” Green said.

Experts suggest having three to six months’ worth of money in this account that you could easily access and use to run your household and pay your monthly bills in the case of an emergency.

How to save for your rainy day fund

rainy day fund side gig
Consider taking on a side gig to bring in extra cash for your rainy day fund.

It can seem daunting to put extra money away each month, but saving money is a key part of smart financial planning. We know it’s important to save for your rainy day fund, but how do you get started? Here are some easy ways to save more money each month:

  • Create multiple savings accounts: Instead of lumping all your money into one savings account, create multiple savings accounts to help you distinguish between the emergency fund and the rainy day fund. If you ever need to access either of these accounts, you’ll know which one to pull from.
  • Automate your savings: It’s easy to say you’ll put extra money into your savings account at the end of each month once bills are paid. But, if you don’t pay yourself first, at the end of the month, you likely won’t have saved what you originally intended. By automating your savings, you’ll automatically have money set aside each month and won’t have to worry about it. Treat your savings as a bill and pay it automatically, on time, each month.
  • Reduce your spending: Money saved is money earned. If you’re looking to save for a rainy day fund, try trimming your spending and adding a little more each week or month to your fund. Cut back on eating out or your daily coffee run and put that money towards your fund.
  • Take on a side hustle: Many millennials are taking on additional work or side hustles as a way to earn more money. If your full-time salary isn’t cutting it, consider taking on a side hustle as a way to quickly boost up your rainy day fund.

Where to keep your rainy day fund

rainy day fund
The best place to stash your rainy day fund is in a savings account, where you can easily access the money in a time of need.

Now that you’ve built up some money for your rainy day fund, where should you keep that money? You want to find a safe place to store your money that gives you easy access to the funds in a pinch but can also allow you to earn interest on your funds.

The best options

Saving accounts: A savings account is a no-brainer when you’re looking for a place to stash your rainy day fund. Savings accounts are FDIC insured and offer better interest rates than checking accounts. Check out the best savings accounts here.

Money markets: Money markets are a type of account that usually offer higher interest rates than checking or savings accounts. You can access more money relatively easy, but money market accounts may limit the number of withdrawals each month. Also, most money market accounts require a minimum balance to be met.

Avoid these options

Checking accounts. Checking accounts probably aren’t the best option for your rainy day fund. They give you quick, easy access to your money, but often offer low, if any, interest. You may also be more tempted to spend the cash if it’s readily accessible in your checking account and you’ve got a linked debit card you can use.

CDs. CDs often charge early withdrawal penalties when you try to cash them out before your term is up. Since emergencies are unpredictable, avoid locking your rainy day fund up in a CD. Stick to accounts that offer easy access like a savings account.

What to spend your rainy day fund on

rainy day fund
A home repair or unexpected medical bill are two examples of a good time to dip into your rainy day fund.

Rainy day funds are usually not used to cover ongoing, long-term, emergency events. “If it’s a true emergency, it’s usually not a materialistic expense,” said Green.

Rainy day funds can be spent on things like car repairs, new tires, and emissions and inspections. Or perhaps you need a new washing machine, fridge, roof or floor? Rainy day funds are meant for such expenses. Most people wouldn’t budget for a new roof because it’s a one-off expense. However, it’s somewhat predictable that you’ll have to repair your car or home at some point, so this type of fund is the perfect financial resource for occasions like this.

However, if you lose your job, become sick or are unable to work for a sustained period of time, you would not use your rainy day fund, but instead, pull from your emergency fund.

“Use your emergency fund when something impacts your ability to earn a paycheck or you lose your income and need to use it [emergency fund] to pay your bills and live off of it,” Green said.

Why a rainy day fund is important

rainy day fund

Change is the only predictable thing in life. It’s almost inevitable that something unplanned will occur requiring additional money to pay for it. Knowing this, it’s smart to plan ahead and prepare for the unexpected. Having a rainy day fund is important because it gives you peace of mind and financial protection in case something happens. This type of fund is extra padding in your budget that can keep you out of debt and on track financially, no matter what unexpected life event unfolds.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sage Evans
Sage Evans |

Sage Evans is a writer at MagnifyMoney. You can email Sage here

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Personal Loans

How to Finance a Tiny House

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

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The tiny home movement has been garnering attention online and captivating the media in recent years. As people seek to minimize their expenses and living space to enjoy other areas of life, tiny houses become a viable option. While purchasing a tiny home may sound appealing, there are many factors to consider before downsizing and joining the movement.

We will walk you through different options on how to finance a tiny house, discuss different types of small dwellings, and talk about the pros and cons of living in a tiny home.

What is a tiny home and how much does one cost?

Tiny homes can vary in structure, makeup and size, but they are typically 600 square feet or smaller, according to Tiny Home Builders. For comparison, the average American single-family home is 2,392 square feet, according to the Census Bureau.

Tiny homes can vary dramatically in price. Depending on the location of the home, the materials used to build your tiny home or the selling price of a furnished small dwelling, prices can range from $15,000 to $100,000.

For example, if you decide to DIY (do it yourself) your tiny home, you can expect to pay anywhere from $15,000 to $20,000 in supplies, plus the time and effort it takes to build it. Should you purchase a completed shell from a tiny home vendor such as Tiny Home Builders, you can expect to pay up to $61,000. And tiny houses on the market can exceed $75,000.

While these prices may seem hefty for a tiny home, keep in mind that the average cost of a new home in the U.S. is $395,000.

4 tiny home financing options

Typically, would-be homeowners get a home mortgage to finance the purchase of their house. While some types of tiny homes qualify for a traditional mortgage, others do not.

So, what are your financing options? Here are four financing options to consider as you aim toward purchasing your own tiny home.

1. Home mortgage

Obtaining a traditional mortgage may be difficult for a tiny home because most lenders require a minimum loan amount, which tiny homes often do not meet.

“The bigger issue is probably the appraisal,” said Mitch Mills, lending manager at Sugar House Mortgage in Salt Lake City. “An appraiser is tasked with arriving at a valuation for a property based on recent sales of like properties. In other words, an appraiser would need to be able to find other tiny homes that have sold in the same market area, ideally within the past 90 days.”

To qualify for a home mortgage, the home must be on a traditional foundation.

“Fannie Mae, Freddie Mac and [the Federal Housing Administration] require a property to be situated on a permanent foundation and connected to public utilities. Some of the tiny homes I’ve seen are on wheels, and this would preclude them from being eligible for traditional financing,” Mills explained.

If the tiny home meets size requirements, is traditionally built and is on a permanent foundation, you may be able to acquire a traditional home mortgage. To compare mortgage rates, check out this tool by LendingTree, which owns MagnifyMoney.

2. Home equity line of credit

A home equity line of credit, also called a HELOC, is a type of secondary loan secured by a lien junior to a mortgage. Using a HELOC is another way to finance the purchase of a tiny home.

As you pay down a mortgage, you are building equity in your home. When you use a HELOC, you borrow against the equity you’ve built to secure your secondary loan. For example, if you purchased a $1 million home and have paid off $500,000, you have that much in equity. Using a HELOC, you could get a second mortgage for a specified amount and use that money to purchase your tiny home.

3. Recreational vehicle loan

Some tiny homes are on wheels, making them portable. If they are roadworthy and certified by the RV Industry Association, they may qualify for a recreational vehicle, or RV, loan. LightStream, a division of SunTrust Bank, offers financing up to $100,000, which can  be used for your tiny home purchase.

4. Personal loan

The fourth financing option for a tiny home is a personal loan. A personal loan is an unsecured loan that you can use for any purchase. Once obtained, you can use the borrowed funds for any item, such as a tiny home. Using a personal loan to finance a tiny home can be a good option because you won’t have to get your home appraised or approved to qualify for the loan, allowing you to purchase a tiny home with a foundation or one on wheels.

Personal loans may also be a smart way to finance your tiny home because you can usually borrow up to $50,000 depending on the lender. More information on personal loans to come.

3 personal loan lenders offering tiny home financing

If you choose to finance your home using a personal loan, here are three lenders that offer tiny home financing.

1. LightStream

LightStream offers personal loans that can be used for financing a tiny home. It offers a fixed-rate loan with no fees or prepayment penalties.

  • Terms of loan: 24-84 months
  • APR range: 3.99%–16.99%
  • Origination fee: No origination fee
  • Loan amount range: $5,000–$100,000
  • Credit score required: 660 minimum
APR

3.99%
To
16.99%

Credit Req.

660

Minimum Credit Score

Terms

24 to 144

months

Origination Fee

No origination fee

SEE OFFERS Secured

on LendingTree’s secure website

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LightStream is the online lending division of SunTrust Bank.... Read More


Your APR may differ based on loan purpose, amount, term, and your credit profile. Rate is quoted with AutoPay discount, which is only available when you select AutoPay prior to loan funding. Rates under the invoicing option are 0.50% higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 3.99% APR with a term of 3 years would result in 36 monthly payments of $295.20.

2. SoFi

SoFi offers personal loans ranging from $5,000 to $50,000, which would allow you to purchase a tiny home. SoFi offers unemployment protection, making it a unique lender. Should you lose your job with no fault of your own, the lenders will allow you a payment grace period and connect you to job placement services so that you can get back on your feet.

  • Terms of loan: 24 to 84 months
  • APR range: 5.99%–16.99%
  • Origination fee: No origination fee
  • Loan amount range: $5,000–$50,000
  • Credit score required: 680 minimum
SoFi
APR

5.99%
To
16.99%

Credit Req.

680

Minimum Credit Score

Terms

24 to 84

months

Origination Fee

No origination fee

SEE OFFERS Secured

on LendingTree’s secure website

Advertiser Disclosure

SoFi offers some of the best rates and terms on the market. ... Read More


Fixed rates from 5.990% APR to 16.990% APR (with AutoPay). Variable rates from 5.74% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.72% APR assumes current 1-month LIBOR rate of 2.49% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.

See Consumer Licenses.

SoFi Personal Loans are not available to residents of MS. Minimum loan requirements might be higher than $5,000 in specific states due to legal requirements. Fixed and variable-rate caps may be lower in some states due to legal requirements and may impact your eligibility to qualify for a SoFi loan.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3. LendingClub

LendingClub is another lender that offers personal loans. Because you can use a personal loan for any reason, it can be used toward your tiny home.

  • Terms of loan: 36 or 60 months
  • APR range: 6.95%–35.89%
  • Loan amount range: Up to $40,000
  • Credit score required: 600 minimum
APR

6.95%
To
35.89%

Credit Req.

600

Minimum Credit Score

Terms

36 or 60

months

Origination Fee

1.00% - 6.00%

SEE OFFERS Secured

on LendingTree’s secure website

LendingClub is a great tool for borrowers that can offer competitive interest rates and approvals for people with credit scores as low as 600.... Read More

What to consider before financing a tiny home

Now that you know your financing options, it’s time to consider if owning a tiny home is the right decision for you. Before moving forward with a new lifestyle of tiny living, consider the pros and cons of owning and living in a tiny home.

Pros of living in a tiny home

Tiny homes can be less expensive than a standard home. For those who don’t want to rent and wish to avoid the large expense of a standard-sized home, tiny homes can be a great option. Opting for a tiny home allows you to cut back on expenses typically associated with homeownership. While you’ll still have to pay for your tiny home upfront, plus utilities and basic living expenses, they will likely be much less compared to a traditional homeowner. Owning a tiny home allows you to feel the pride of homeownership without the financial burden.

Tiny homes can offer financial freedom. Because your mortgage or loan payment will likely be less than a traditional mortgage, you’ll likely have a surplus of discretionary income to spend, giving you financial freedom. If you wish to spend your extra money traveling, pursuing higher education, or investing, owning a tiny home can offer financial freedom.

Tiny homes can provide more free time. With 600 square feet or less, you only have so much space to clean and upkeep. Because you’ll spend less time cleaning your home and doing yardwork, you’ll have more time to enjoy other hobbies. Tiny homes can provide more free time in which you can enjoy life and the things you like to do with it.

Tiny homes can be portable. Homeownership may appeal to you, but you don’t want to be tied to one location. And you don’t want to rent. Because tiny homes can have wheels, you have flexibility. You can settle wherever you like, permitting zoning laws. If you have wanderlust and wish to explore the country without living out of a suitcase, owning a mobile tiny home is a great option that allows you flexibility and movement while still enjoying the stability and comfort of homeownership.

Cons of living in a tiny home

Tiny homes can be hard to place. Because zoning laws vary city to city and state to state, you cannot place your tiny home anywhere you’d like. Flexibility is a double-edged sword. Tiny homes allow you to take your home anywhere, but you’ll have to make sure you’re moving to a place where it’s legal to place your tiny home. Sometimes, the location you desire may not allow for tiny homes.

Tiny homes can be cramped. Tiny homes are, in fact, tiny. That being said, if you wish to entertain guests, space will be very limited. Also, if you are looking for some privacy in a secluded space, your options are sparse since your space is so small. If the thought of lack of privacy gives you anxiety, tiny homes may not be right for you.

Tiny homes don’t have all the amenities of a traditional home. Depending on your tiny home, you may not have certain amenities such as laundry machines, dishwashers or a full-size refrigerator. While this may be a perk of simplifying, it can also frustrate some potential owners. When purchasing your tiny home, ensure it has all the features you need.

Which type of tiny home do you want?

Do the pros of owning a tiny home outweigh the cons? If so, let’s briefly discuss the different kinds of tiny homes available.

  • Tiny traditional homes: Think your typical house but shrunk down to a smaller version. Tiny traditional homes will have a foundation and will be made of the same building materials, such as wood, plywood and concrete. They are not mobile and do not have wheels.
  • Tiny house on a trailer: Simply put, this is just a tiny house on a trailer. It can be moved from location to location when pulled by a truck. Like a traditional tiny home, they are usually built out of normal building materials.
  • Converted storage shed: A storage shed is usually made of steel or galvanized aluminum, but a converted storage shed can be used as a type of tiny home. To make it feel more like a home, owners can install insulation and drywall and design the inside just as they would an apartment or home.
  • Container home: A container home is a storage unit or semitruck shell transformed into a living space. Once revamped, designed and decorated, it doubles as a home for minimalists.

Does your city permit tiny homes?

The last thing to consider before purchasing a tiny home is where you’ll put it. Each city and state has different building codes and zoning laws that can affect where you are legally allowed to place your tiny home.

Some states require the tiny home to be an accessory dwelling unit (ADU), meaning it is on the same property of a traditional home. But some states have begun adopting the idea of tiny housing and have made it more realistic for tiny homeowners to build and live in the state outside of an ADU. These states have more progressive regulations making it easier for tiny house hunters: California, Colorado, Florida, Massachusetts, Michigan, New York, Oregon and Texas.

The American Tiny House Association has compiled state-by-state information regarding zoning laws and construction codes for tiny houses. Check out the complete guide to see if owning a tiny home in your city is possible.

The tiny home movement is gaining popularity and offers a variety of perks for people looking to minimize, downsize and enjoy a flexible lifestyle.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sage Evans
Sage Evans |

Sage Evans is a writer at MagnifyMoney. You can email Sage here

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