How To Finance An RV As A Primary Residence In 2024

Living in an RV as a primary residence can be an adventurous and exciting lifestyle choice. Whether you’re looking to downsize, travel full-time, or simply enjoy the freedom of living on the road, financing an RV as your primary residence is a decision that requires careful consideration. In this comprehensive guide, we will explore the pros and cons of living in an RV, various financing options available to you, factors to consider when choosing an RV financing option, how to qualify for RV financing, tips for managing your finances while living in an RV, common mistakes to avoid, and address some frequently asked questions.

Pros and cons of living in an RV as a primary residence

Living in an RV as a primary residence comes with its own set of advantages and challenges. Let’s take a closer look at the pros and cons:

Pros

Flexibility and Freedom: Living in an RV allows you to travel and discover new places whenever you desire. You can wake up to breathtaking views, change your backyard as often as you like, and experience a sense of adventure that traditional homeownership cannot offer.
Cost Savings: RV living can be a more affordable option than owning a traditional home. You can save on property taxes, mortgage payments, and utility bills. Additionally, downsizing your belongings can reduce expenses and lead to a simpler lifestyle.
Minimal Maintenance: RV maintenance requires less effort and time than a traditional home. You won’t have to worry about mowing lawns, cleaning multiple rooms, or dealing with extensive repairs. This means more time for relaxation and pursuing your passions.

Cons

Limited Space: Living in an RV means downsizing your living space significantly. While decluttering and embracing a minimalist lifestyle can be liberating, adjusting to the limited storage and living areas can also be challenging. Organization and efficient use of space become essential.
Lack of Stability: Living in an RV means constantly being on the move. This lack of stability can make establishing a sense of community and building lasting relationships difficult. Also, finding suitable parking and camping spots can sometimes be challenging, especially during peak seasons.
Maintenance and Repairs: RVs require less maintenance than traditional homes, but they require periodic upkeep and repairs. Mechanical issues, wear and tear, and unforeseen damages are inevitable and can add up over time.

RV Financing Options

If you’ve decided that living in an RV as a primary residence is the right choice, it’s time to explore your financing options. Here are five common ways to finance an RV:

Specialized RV Financing

Specialized RV financing is specifically designed to purchase recreational vehicles. Many lenders offer loans tailored to the unique needs of RV buyers. It’s crucial to explore various lenders and compare their offers to discover the most suitable financing option for your requirements. These loans typically feature competitive interest rates and flexible terms, so take the time to shop around and make an informed decision.

Dealership Financing

When purchasing an RV, you may have the option to finance directly through the dealership. Dealership financing can be convenient, as they handle the entire financing process in-house. However, it’s crucial to carefully review the interest rates, terms and conditions, and any additional fees associated with dealership financing. Comparing offers from multiple dealerships can help you make an informed decision.

Personal Loan from Financial Institutions

A choice is to acquire a personal loan from a financial institution like a bank or credit union to fund your RV purchase. Personal loans typically come with fixed repayment terms and interest rates. However, the interest rates may be higher than those of specialized RV loans. Checking with different financial institutions and comparing their terms before finalizing your loan is advisable.

Borrow from Your Home Equity

If you own a home and have built up equity, you may consider borrowing against it to finance your RV. Home equity loans or lines of credit can provide you with a lump sum or a revolving line of credit for your RV purchase. Remember that this option risks your home if you default on the loan. Seek advice from a financial advisor to grasp the implications and ascertain if this is the appropriate decision.

Sale of Your Home

For those looking to make RV living a permanent lifestyle, selling your current home can provide the necessary funds to purchase your RV outright or significantly reduce your financing needs. This option eliminates the need for monthly mortgage payments and can provide greater financial freedom. However, it’s essential to carefully consider the impact of selling your home and evaluate whether you’re truly ready to embrace RV living as your primary residence.

How do you declare an RV as your primary residence?

If you designate your RV as your main residence, you can enjoy tax deductions on loan interest and other perks. However, not all RVs meet the necessary criteria, and there are factors to consider before committing to this arrangement.

How does financing an RV for full-time living function? Is it the right choice for you?

Fortunately, the IRS has relatively few requirements for a primary residence. You just need a functioning toilet, kitchen area, and sleeping quarters to qualify. Interestingly, the IRS accepts various nontraditional homes like houseboats.

While most RVs easily meet these requirements, some DIY converted vans lacking a bathroom may face challenges. To initiate the process, inform your lender that you’re financing your RV as your primary home. Remember, you can only declare one primary residence.

Assuming your RV meets the residence criteria and your credit score exceeds 700, obtaining full-time RV financing shouldn’t pose significant difficulties. However, certain lenders may be hesitant, necessitating some shopping around.

When financing an RV as your primary residence, expect a secured loan where your RV serves as collateral. Failure to make payments could result in repossession.

Another consideration is whether your locality permits RVs to be registered as dwellings. Federal regulations are lenient, but local laws vary. You might explore registering your RV as an accessory dwelling unit (ADU), commonly used for secondary living structures alongside primary residences. Check the rules for ADUs in your area, as this might be an alternative if your RV doesn’t qualify as a standard dwelling.

What are the impacts of financing an RV as a primary residence?

Financing your RV as your primary residence can have various effects, but perhaps the most significant is your taxes.

Taxes

If your RV is your primary residence and you have a secured loan, you can deduct the interest from your taxes, similar to a mortgage. This deduction can be significant, especially when combined with other deductible expenses, potentially reducing your tax burden.

Typical deductible expenses include:

Sales taxes
Insurance premiums
Retirement contributions

You might qualify for additional deductions if you conduct business from your RV.

However, itemizing might not be advantageous if your total deductions don’t exceed the standard deduction. Consider consulting a tax professional or doing the calculations to determine the best approach for your situation.

Competitive loan rates

Another benefit is that many lenders, like Alliant Credit Union, provide competitive loan rates for full-time RV financing. This can result in lower interest costs for your RV loan if you use your RV as your primary residence.

Higher insurance costs

However, if you finance an RV as your primary residence, you’ll probably encounter higher insurance costs. Living in your RV full-time increases your liability exposure, necessitating a more comprehensive insurance policy. Additionally, your lender may need you to maintain a certain level of coverage.

Loan repayment terms

Another factor to consider is the repayment term of the loan. When financing an RV as your primary residence, repayment terms usually range from 10 to 20 years. If you have a loan with an exceptionally long repayment term, you could pay a significant amount in interest over the years.

Furthermore, RVs generally do not retain their value like traditional homes. Therefore, selling your RV is unlikely to recoup all the additional costs. Additionally, unlike with home equity loans or lines of credit, you typically cannot borrow against the value of your RV.

Should you finance an RV as a primary residence?

There are several great reasons for financing an RV as a primary residence, but it’s not for everybody. When deciding if it’s right for you, there are a few things to ask yourself first.

Are you currently paying off a mortgage?

According to the IRS, you can only designate one place as your primary residence, typically where you spend the majority of your time. If you own a home and decide to live full-time in an RV without selling your house, there are some considerations to be aware of. For instance, if you still have a mortgage on your home, you won’t be able to claim the interest on your taxes anymore. This change can have various impacts, so assessing your situation beforehand is crucial.

If going full-time in an RV doesn’t suit your circumstances, another option is to designate your RV as a second home. Doing so allows you to still deduct interest on the RV loan while retaining the deduction for your mortgage.

Will financing an RV as a primary residence save you on taxes?

While the interest on your RV loan can be substantial, it’s unlikely to surpass the standard deduction amount. As of 2022, the standard deduction is $12,950 for single taxpayers and $25,900 for married couples. For many individuals, opting for the standard deduction is more advantageous than itemizing deductions.

If your qualifying expenses don’t exceed the standard deduction threshold, you might find it more beneficial to stick with it. Consequently, financing an RV as your primary residence may not offer significant tax advantages in such cases.

Factors to consider when choosing an RV financing option

When choosing an RV financing option, it’s essential to consider many factors to ensure you make a well-informed decision. Here are some essential factors to keep in mind:

Interest Rates and Terms: Compare the terms and rates offered by various lenders to find the most advantageous option. Extended repayment terms and lower interest rates can help make your monthly payments more manageable.
Down Payment: Consider the down payment required for the financing option. A higher down payment can decrease the loan amount and potentially lower your monthly payments.
Credit Score: Your eligibility for interest rates and loan terms is primarily determined by your credit score. Make sure your credit score is in good shape before seeking RV financing.
Monthly Budget: Assess your monthly budget to figure out the amount you can comfortably afford for RV financing. Consider the monthly payment and additional costs such as insurance, maintenance, and campground fees.
Pre-Approval: Getting pre-approved for RV financing can help you understand your budget and negotiate better terms with lenders. It also shows to sellers that you’re a serious buyer.
Additional Fees: Take note of any extra fees linked to the financing option, such as loan origination fees, closing costs, and early repayment penalties. These fees can mainly affect the overall cost of purchasing your RV.

Considering these factors will help you find an RV financing option that aligns with your financial goals and ensures a comfortable living experience on the road.

How to qualify for RV financing as a primary residence

Qualifying for RV financing as a primary residence typically requires meeting certain criteria. Here are some steps you can take to improve your chances of getting approved for a loan:

Build a good credit score: Lenders consider your credit history when evaluating loan applications. Ensure timely payment of bills, maintain low credit card balances, and refrain from opening new credit accounts before applying for an RV loan.
Save for a down payment: The larger down payment can enhance your chances of approval and potentially result in better loan terms. Aim to save at least 20% of the RV’s purchase price as a down payment.
Maintain a stable income: Lenders want to ensure that you have a consistent source of income to make your monthly loan payments. A stable job or a steady income stream can increase your chances of approval.
Minimize your debt-to-income ratio: Lenders typically look at your debt-to-income ratio, which compares your monthly debt payments to your monthly income. Aim to keep this ratio below 43% to demonstrate your ability to handle additional debt.
Gather necessary documentation: Be prepared to provide documents like proof of income, bank statements, and tax returns when applying for an RV loan. Having these documents readily accessible can expedite the application process.

Tips for managing your finances while living in an RV

Living in an RV as a primary residence requires careful financial planning and management. Here are some tips to help you navigate your finances effectively:

Create a Budget: Establish a detailed budget for all your expenses, including loan payments, insurance, fuel, maintenance, campground fees, and other living costs. Stick to your budget to ensure financial stability.

Minimize Living Costs: Embrace a minimalist lifestyle and downsize your belongings. Reduce energy consumption, cook meals in your RV, and use free or low-cost camping options to minimize living expenses.

Save for Emergencies: Allocate funds for an emergency reserve to handle unforeseen costs like repairs, medical expenses, or temporary lodging in case your RV becomes uninhabitable.

Plan for Maintenance and Repairs: RVs require regular maintenance and repairs. Budget for these costs and consider setting aside a separate fund to cover future repairs and upgrades.

Research Affordable Campgrounds: Look for affordable campgrounds or RV parks that offer reasonable monthly rates. Planning and booking longer-term stays can often lead to discounted rates.

Consider Workamping Opportunities: Workamping involves exchanging work for free or discounted campsite fees. Explore working opportunities to reduce your living costs while enjoying new experiences.

Review Insurance Coverage: Ensure your RV is adequately insured against accidents, theft, and damage. Regularly assess your insurance coverage to ensure it matches your requirements.

Following these tips, you can effectively manage your finances and enjoy a fulfilling RV lifestyle without unnecessary financial stress.

Common mistakes to avoid when financing an RV as a primary residence

While financing an RV as a primary residence can be an exciting opportunity, it is important to avoid common mistakes that can lead to financial strain. Here are some pitfalls to watch out for:

Overspending on the RV: Avoid purchasing an RV that exceeds your budget. Spending excessively on the initial purchase can result in financial strain and restrict your ability to fully enjoy the RV lifestyle.
Neglecting Maintenance Costs: RVs require regular maintenance and upkeep. Failing to budget for these costs can cause expensive repairs or decreased longevity of your RV. Be sure to factor in maintenance costs when creating your budget.
Not Researching Financing Options: Take the time to research and compare different financing options. Failing to explore all possibilities can result in missed opportunities for better terms and rates.
Ignoring Insurance Needs: Ensure that you have adequate insurance coverage for your RV. This includes liability coverage, comprehensive coverage, and coverage for personal belongings. Proper insurance protection will provide peace of mind and financial security.

Do you have good enough credit?

Do you have a strong credit score? Securing an RV loan can be challenging due to the risks involved for lenders. Typically, you’ll need a higher credit score than a standard auto loan. It’s recommended to target a credit score of at least 700. While securing RV financing with poor credit is feasible, it can be challenging. Lenders will also evaluate your debt-to-income ratio before approving full-time RV financing. To qualify, a ratio of 40% or less is generally preferred. If you don’t meet these requirements, securing financing for full-time RV living might be more challenging.

FAQs

Can I finance an RV if I have bad credit?

Although having poor credit can present obstacles in obtaining favorable financing terms, RV financing remains attainable. Look into specialized lenders who cater to borrowers with lower credit scores and anticipate the possibility of higher interest rates.

What type of insurance do I need for my RV?

Most states have liability insurance for your RV. Additionally, you may want to consider comprehensive insurance to protect against theft, accidents, and damages. Consult with an insurance agent specializing in RV coverage to show the appropriate coverage for your needs.

Can I finance a used RV?

Yes, it’s possible to finance a used RV. However, the terms and rates may depend on the RV’s age, condition, and value. It’s vital to explore multiple lenders and evaluate their offers to secure the optimal financing choice for your used RV.

What happens if I can’t make my RV loan payments?

If you’re unable to meet your RV loan payments, it’s crucial to contact your lender at the earliest opportunity to discuss your situation. They may offer options like loan modification, deferment, or refinancing. Ignoring the problem can lead to repossession and damage to your credit score.

Can I deduct the interest on my RV loan?

Sometimes, the interest on an RV loan may be tax-deductible if the RV qualifies as a second home. Consult with a tax professional to determine your eligibility for the deduction based on your circumstances.

Conclusion on financing an RV as a primary residence

Financing an RV as a primary residence can be the best option for those seeking a more adventurous and flexible lifestyle. By exploring different financing options, taking into account key factors, and managing your finances prudently, you can turn your dream of living in an RV into a reality. Remember to carefully evaluate your financial situation, research lenders, and plan for the unexpected. With proper planning and responsible financing, you can embark on a new chapter in your life and enjoy the freedom and excitement of living in an RV.

Are you ready to take the leap into full-time RV living? SecureSpace offers reliable, secure, and convenient storage solutions for your belongings while you start on your new adventure. With various storage unit sizes and flexible rental options, we make it easy to store your items safely while you travel. Visit SecureSpace today to find the perfect storage solution for your needs and start your RV living journey with peace of mind.

GET IN TOUCH