Of course, that’s not the number one reason people choose tiny houses. If you’re tired of hefty mortgages or you want to live a simpler life, without rising utility bills and endless maintenance, your answer is a tiny house. 

Be sure to know the following before you dash in: Will tiny living actually save money in the long term or is it just a fad idea with all sorts of secret costs? Tiny houses do cut on square footage price, but do they reduce expenditure as much as you’d expect?

Let’s find out. 

Living Expenses in a Tiny House

Say you’re looking to downsize and you’re in the process of selling your house in Waco, TX, or maybe you’re selling your apartment in Los Angeles, Ohio, or wherever. You’re looking forward to making some money and then saving or investing part because your ongoing living expenses will be cheaper in a tiny house. Right? 

You’re probably already familiar with the initial setup costs, so let’s talk long-term expenses. 

If you take the state of Texas as a reference point, you’ll see varied data across different cities. Which is to be expected.

* the national average for the Overall Cost of Living Index is 100. A value below 100 points towards a lower, while a value above 100 points to a higher cost of living.

Dallas and Austin will be the only cities in the state of Texas where ‘living costs’ are above the average, according to Best Places and Home City Real Estate. However, Dallas, in comparison, has a MUCH lower cost of housing. El Paso and Waco have among the lowest cost of living, and the housing cost i also extremely affordable compared to other major cities across Texas.

Cost of living varies regardless of the state you live in. Usually, it comes down to supply and demand. Plus the popularity of the city. 

But to better understand the concept, here’s a breakdown of what you can expect.

Monthly Utility Costs

Your utility bills will be much lower because a tiny house is, well… Tiny, so there’s better energy efficiency. Heating, cooling, and lighting need less power in compact space. 

For instance, if your tiny home is well insulated, electricity will cost much, much less than it would in a traditional house.

Maintenance and Repairs

Similar to other houses, tiny houses require maintenance, albeit in small quantities. You’ll need to check your roof, and plumbing systems and maintain your HVAC.

The size of a tiny home can lower the cost of materials and labor, but some custom components or off-grid systems might need specialized repairs. On average, maintenance expenses are around $500 to $1000 per year. For traditional homeowners, it’s $2000 and up. 

Property Taxes and Insurance

Property taxes differ according to how your house is classified. If you have a tiny home on a permanent foundation, it’s subject to local property taxes. The amount, though, is usually lower than that for traditional homes because the value of the property is lower. 

If you have a mobile tiny home, you most likely won’t need to pay any property tax because they’re exempt from taxes of this kind. Nonetheless, it must be noted that you need a different type of insurance (e.g. RV insurance).

Insurance for tiny homes on foundations ranges from $400 to $800 a year. RV insurance is between $250 and $500 per year. 

Traditional vs. Tiny House Living – Comparing Costs

Let’s put these two options side by side so we can really see how the decision on where to live will affect your budget.

Upfront Cost

If you go the traditional route, you’ll pay anywhere between $300,000 and $4000,000 for an average house, but this varies a lot depending on location. A tiny house costs anywhere between 30,000 and 100,000 USD. The price depends on size, customizations, and whether DIY or professionally built. To put it a little bit differently, a tiny house won’t require you a 30-year-long mortgage in order to be able to afford a livable place for you.

Monthly Expenses

For a traditional home, you’ll pay about $1,200 to $2,500 every month for the mortgage, and then you also have utility bills, cost of maintenance, and property taxes, which will all be a few hundred dollars more. 

Tiny house owners, especially those that own their homes outright, will pay about $300 to $800 monthly. This includes utilities, maintenance, and if applicable, land lease fees. 

Long-Term Impact on Finances

In the long run, living in a tiny house will save you a great deal of money because there’s no mortgage and monthly expenses are lower. Even if you have a mortgage, you’ll still pay it off sooner and save more. The catch is the resale value. Traditional houses generally appreciate over time, but that’s not the case for tiny homes. Usually, their value goes down. 

Even if your tiny house is fixed and it’s on a piece of land you own, you still won’t get the same financial return as you would on a traditional house.

And to sum it all up, here’s a brief overview:

Conclusion

Yes, if you compare up-front costs, a tiny house is cheaper than a traditional house. Are the monthly costs lower? Yes. Is it better to live in a tiny house? Well, that part is completely up to you. 

Even with the savings, there’s a reason most people decide on a traditional house. Tiny houses are getting more popular and they’re undoubtedly a good option, but nobody can tell you if it’s going to be the best decision you ever made or the worst one.