How going tiny (house) can downsize debt

Life just costs a lot less when you live in a tiny house

How going tiny (house) can downsize deb

Feeling boxed in by big debts? Moving into a tiny house, or even just a smaller space, can be a good way to dramatically cut costs and free up funds to pay down debt.

An informal survey done in 2015 on tiny-home ownership by tiny house lifestyle blog The Tiny Life, which got over 4,000 responses, revealed that 68 percent of tiny-home owners have no mortgage. That’s compared to 23 percent of homeowners who bought a home without a mortgage, according to 2016 research from real estate company Zillow. And 65 percent of tiny-home owners reported having no credit card debt.

The lack of mortgages can be attributed to the fact that due to the high cost of processing mortgage loans, it’s hard to get a mortgage for less than $50,000. That means some tiny-home buyers must take out personal loans instead of mortgages. For example, LightStream is a lender offering tiny-house loans.

However, it’s easier to pay off and avoid getting into debt when you live in a small space, says Ryan Mitchell, managing editor of The Tiny Life. For example, his tiny house in Charlotte, North Carolina, cost $30,000, the equivalent of about two years of rent in that city.

“Every day I live in it is just money in the bank,” he says. And he saves in other ways, too, paying only $25 a month for utilities.

“If you live in a tiny house, life just costs a lot less,” he says.

Do you like the idea of going tiny to pay down debt? Here are stories of five people who did just that, paying down auto, business, credit card, mortgage or student loan debt:

The tiny-house dwellers: Claudia Pennington, a digital marketing coach who blogs at, her husband Garrett and their three cats.

The tiny house: A manufactured 500-square-foot house on a foundation on a small lot in Lancaster County, Pennsylvania.

The debt: The couple owed $155,000 on the mortgage for their 1,500-square-foot home. They had racked up $12,000 in credit card debt on a house remodel, using a 0-percent deal. But the introductory period was quickly coming to an end, and interest was about to jump to more than 20 percent. They also owed $35,000 in student loans.

How they downsized debt: The Penningtons realized they didn’t regularly use even half the space in their home and felt burdened by the mortgage. “It didn’t quite add up,” Claudia says.

The couple started researching tiny houses, and bought a plot of land for $3,500 cash. They originally wanted to build a very tiny home, but local building codes required their dwelling to be at least 500 square feet. They took out another mortgage of a little over $69,000 to buy a manufactured tiny home, get the site prepared, install a picket fence and pay taxes and fees.

Their big house didn’t sell right away, so they carried two mortgages for six months. “It was a bit of a logistical nightmare,” Claudia says.

When the house sold, they got less than they’d hoped, so they weren’t able to use equity to pay off debt. However, moving into their tiny house in the fall of 2015 reduced their property taxes, utilities and mortgage payment. The move also forced them to be more judicious about household purchases because they had a lot less space.

They attacked credit card debt first, then paid off their tiny house mortgage in November 2016, and owe only $10,000 more on student loans. Going tiny helped the couple “crush” their debt, Claudia says.

Tips on going tiny to pay down debt: Find out zoning requirements early. When the Penningtons learned about the house size requirements in their area, it threw a wrench into their plans, and added to their total cost. Also, start downsizing early and try to sell the possessions that won’t fit into your tiny house. Putting the proceeds toward debt can help you get a head start toward your goals, Claudia says.


The tiny-house dwellers: Shawn Bronson, an art director and designer who blogs at, his partner Paul and their dog.

The tiny house: A 143-square-foot home on wheels that sits on 7 acres in the Great Smoky Mountains in North Carolina.

The debt: $180,000 in student loans, from college and graduate school, which were accruing $30 a day in interest, plus $2,000 in credit card debt.

How they downsized debt: Just before his 30th birthday, in 2014, Shawn decided he was tired of renting and wanted to own a home. But he didn’t want a mortgage and already felt burdened by his “massive grad school student loan.”

Shawn decided to spend all his spare time building a tiny home, keeping the total cost under $20,000. Because he travels for work, he liked the idea of a house on wheels. He ordered a trailer to serve as the foundation, used software to plot out a design, and built the house in his dad’s garage. During that time, he met Paul, and the couple moved into the home with their mini Dachshund, Gus.

With no house payment and Paul making the payment on the land, Shawn puts about 75 percent of his income toward paying down debt. So far, he’s paid off about $30,000 and expects his total balance to dip to $100,000 after he finishes the show he’s currently working on.

Debt was the “leading factor” in his decision to go tiny, he says.

Tips on going tiny to pay down debt: Make a realistic budget for your tiny home, Bronson recommends. Some people decide they want to build a tiny house for $10,000, then find out that’s not feasible if they’re going to use the materials and finishes they want. “Try to make it work by planning, making a budget and finding out what items cost ahead of time,” he says.


The tiny-house dwellers: Stephen Twomey, an internet marketing consultant, and his wife, Jane.

The tiny house: A 600-square-foot rental home in Traverse City, Michigan.

The debt: $12,000 in business debt from establishing an insurance agency and then changing careers.

How they downsized debt: Before they moved to Michigan, the couple spent $1,300 a month to rent a 1,500-square-foot, three-bedroom town home with “really cool views” overlooking a valley in Salt Lake City. After their move, they decided to rent a house less than half that size for $500 a month.

The move saved them about $1,000 a month on rent and utilities, but they also cut other expenses. “We didn’t have TV, we didn’t go out to dinner, it was just pedal to the metal,” Twomey says.

For Twomey and his wife, downsizing was a temporary step that allowed them to blast their debt in less than a year. After that, they saved up for a down payment and bought a larger home in which to start a family.

“It was mildly uncomfortable, but it was well worth the sacrifice,” Twomey says.

Tips on going tiny to pay down debt: Remember that tiny house living can be temporary, and you can rent. You don’t need to shell out the cash to build or buy an extremely tiny house. Get creative in looking for a place. You might find a winter-proofed hunting cabin or a little cottage out in the country, he says. “Don’t be afraid to look outside of the metro area,” he says.


The tiny-house dwellers: Laura LaVoie, a writer who blogs at Life in 120 Square Feet, her partner Matt, and their cat.

The tiny house: A 120-square-foot house on a foundation on 15 acres in rural western North Carolina.

The debt: A mortgage and $25,000 in credit card debt.

How they downsized debt: While building their tiny house, starting in 2009, the couple sold their 2,700-square-foot home and moved into an 800-square-foot apartment in Atlanta, which cut their living costs in half. Before the move, “I was working a corporate job and making decent money, but most of it went to the mortgage,” Laura says.

She also kept accruing credit card debt, mostly from going out to eat and buying household items, such as furniture and accessories. “I always felt compelled to fill the space,” she says of her huge home.

It took three years to build the tiny house, at a total cost of about $20,000. Due to lower living costs in the apartment, Laura was able to pay off her credit card debt before moving into the tiny house.

Once they moved in, they were able to save enough money in one year to purchase a 700-square-foot bungalow in Asheville, North Carolina, with cash.

“Moving into the tiny house was ultimately a catalyst to get us to change the way we approached everything,” she says.

Tips on going tiny to pay down debt: If you build a tiny house on wheels, which can be cheaper than building on a foundation and allow you to escape minimum square footage requirements, figure out ahead of time where you will park your home.

Tiny houses on wheels are licensed as RVs and are illegal as primary dwellings in many places, Laura points out. For example, one recent college grad in Massachusetts built a tiny house and then had to put it in storage after a neighbor complained to local zoning officials.

If you don’t iron out these details ahead of time, you could end up stuck with a very expensive object you can’t live in, she says.


The tiny house dwellers: Macy Miller, who blogs at, her husband James, their children Hazel and Miles, and their dog.

The tiny house: A 232-square-foot home on wheels in Boise, Idaho.

The debt: Macy owed $22,000 on a car loan for her Toyota Prius. She had otherwise managed to stay out of debt, working her way through college to avoid loans and never racking up a balance on her credit cards.

How they downsized debt: Macy was in graduate school for architecture when she decided to put her knowledge to use to build her own 196-square-foot home, starting in 2011. The tiny home cost just under $11,500 to build. In 2015, they added 36 square feet at a cost of less than $2,000.

During construction, she met James at school, and the two got married and moved into the tiny house. Each month, she put an extra $1,200, which used to pay for rent and utilities, toward the principal on her auto loan. Eight months after moving in, she paid off her car.

In the meantime, their family had grown. They now have two small children and Denver, a Great Dane.

Ditching debt and rent payments gave the family more freedom. Now, they’re renovating a 1966 travel trailer, and plan to take a few months to travel around the country.

“There aren’t many better things than the feeling of owning your own life,” Macy says. “Being debt free gives you the ability to live forward instead of being stuck working to pay for the past.”

Tips on going tiny to pay down debt: Consider going DIY. If you hire a builder to construct your tiny house, and especially if you use expensive materials such as reclaimed wood and granite, a diminutive dwelling can end up costing almost as much as a normal-sized house.

By building her own tiny house, Miller was able to avoid labor costs and pay for materials and supplies along the way.

Finally, know that a tiny house isn’t a magic bullet for getting out of debt, she says. However, if being debt free is your goal, “A tiny house can absolutely help.”

See related: 8 steps for reducing credit card debt, Over your head in debt? 5 extreme budgeting ideas

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Updated: 12-11-2017