How to Finance Your Dream Barndominium

As you ponder building your dream barndominium, financing likely weighs heavily on your mind. Constructing a custom residential structure from a reno… As you ponder building your dream barndominium, financing likely weighs heavily on your mind. Constructing a custom residential structure from a renov…

As you ponder building your dream barndominium, financing likely weighs heavily on your mind.

Constructing a custom residential structure from a renovated barn or other agricultural building is no small undertaking, and the costs can be substantial.

However, with some creative thinking and the right financing strategy, your barndominium could become a reality.

There are several avenues to explore for funding your barndominium conversion or construction.

A traditional mortgage, home equity loan, or line of credit are options if you have equity in an existing property.

Crowdfunding through real estate investment sites is an unconventional but potentially viable source of capital from private individuals.

The USDA also offers loans and grants for barndominium projects in rural areas.

With drive and determination, you can finance and build the barndominium of your dreams.

It will require patience, planning, and likely piecing together multiple funding sources.

But for a truly custom home that fulfills your vision, the work will be well worthwhile.

Keep your goal visible, get creative with your financing options, and start converting that old barn into the house you’ve always wanted.

What Is a Barndominium?

A barndominium, short for “barn condominium,” is a residential structure that incorporates a barn-inspired design.

Barndominiums have become popular in recent years for those seeking an open-concept home with rustic charm.


The average cost to build a barndominium ranges from $100 to $200 per square foot, depending on factors like:

  1. Size - A larger barndominium, around 3,000 to 5,000 square feet, will cost more to build than a smaller one.

  2. Materials - Higher-end materials like stone, brick, and tile will increase the price.

    Using more affordable metals like steel for the exterior and interior can help lower costs.

  3. Amenities - Adding a garage, porches, extra bedrooms or bathrooms, and upgraded fixtures will raise the total price.

    Keeping the design simple by limiting extra rooms and sticking to essential amenities will be more budget-friendly.


There are several options for financing a barndominium:

  • Personal savings - Using your own money is the simplest option but may not be feasible for most people.

  • Construction loan - A short-term loan to cover building costs that is then replaced by a traditional mortgage.

    Interest rates are usually higher than a mortgage.

  • Mortgage - A traditional 15- or 30-year mortgage.

    Interest rates and down payment requirements will depend on your credit.

  • Owner builder loan - Specialty loan for those acting as the general contractor.

    Funds are disbursed gradually as construction milestones are met.

    Interest rates tend to be higher.

By estimating costs accurately, choosing affordable materials and amenities, and exploring the best financing options for your needs, building your dream barndominium can absolutely be within your reach.

With some patience and financial planning, you'll be enjoying the rustic home of your dreams in no time.

Benefits of Living in a Barndominium

A barndominium offers several benefits over a traditional house.

Lower Costs

Building a barndominium typically costs significantly less than a house of the same square footage.

The simple post-frame construction and metal exterior reduce material and labor costs.

You'll also save on utilities since the open-concept design is more energy efficient.


The open floor plan provides flexibility in how you arrange the space.

You can easily reconfigure rooms or repurpose areas as your needs change.

The high ceilings and abundant windows also create an airy, spacious feel.


Steel buildings can last 50-100 years with minimal maintenance.

The steel frame and metal siding stand up well to weather, insects, and wear and tear.

Properly maintained, a barndominium will provide decades of use.


While the basic structure is simple, you have options to customize the interior and exterior to your tastes.

You can add partitions, lofts, porches, stone, brick or stucco accents.

With some modifications, a barndominium can take on the appearance of a more traditional home.

Resale Value

Barndominiums have become increasingly popular, so they tend to hold their resale value well.

The lower cost basis and durability are appealing to potential buyers.

However, resale may depend on factors like location, custom features, overall condition, and current real estate trends.

Estimating Your Barndominium Budget

To finance your dream barndominium, you’ll need to determine an estimated budget.

This will help you explore your options for affording such a project.

Some key costs to consider include:

The Structure

The largest expense is the physical structure of the barndominium.

Metal buildings can cost $20 to $50 per square foot.

A 2,000 to 3,000 square foot barndominium would cost $40,000 to $150,000 for just the shell.

Factor in additional costs for a concrete foundation, electrical wiring, plumbing, and any interior walls or rooms.

Interior Finishes

The interior design and finishes will significantly impact your total budget.

Choose between basic finishes like drywall, vinyl flooring, and minimal trim or higher-end finishes such as wood paneling, stone, tile, and custom cabinetry.

Budget at least $10 to $30 per square foot for a finished interior.

Optional Add-Ons

Consider any additional features like a garage, porch, deck, or extra bedrooms.

An attached two- to three-car garage would add $10,000 to $30,000.

Screened porches and decks can cost $10 to $30 per square foot.

Extra bedrooms and bathrooms will increase costs for framing, drywall, flooring, fixtures, and more.

Permits and Fees

Don’t forget the additional permits, licensing, and utility connection fees to make your barndominium habitable.

Building permits, septic permits, utility hookup fees, and zoning or planning approvals can cost $5,000 to $20,000 total depending on your location and utilities.

Using estimates for your barndominium size and desired features, you can determine a realistic budget range to work within.

Get quotes from builders and check your preapproval options.

You may need a construction loan, and you’ll want to ensure you have a down payment saved.

With proper planning, you can make your barndominium dreams come true.

Financing Options for Your Barndominium

When financing your dream barndominium, you have several options to consider.

Evaluating each based on your financial situation and needs will help determine the best path forward.


If you have sufficient cash reserves, paying for the full cost of construction upfront is the simplest approach.

You avoid interest charges and loan fees, and have full equity in the property immediately.

However, this may not be feasible or practical for most homeowners.

Conventional Mortgage

A standard mortgage is a popular choice for barndominium financing.

You can borrow a fixed amount, typically up to 80% of the home's value, and repay over 15-30 years.

Interest rates are usually lower than other options.

You must have good credit to qualify and provide income verification.

The barndominium must also meet conventional home standards.

Construction Loan

A construction loan covers building costs, then converts to a traditional mortgage once complete.

You pay interest only during construction, then principal and interest for the remainder of the term.

Construction loans usually offer lower down payments, around 20%, but have higher interest rates.

The lender will require detailed plans, permits, and a builder contract to approve the loan.


A home equity line of credit (HELOC) uses your existing home as collateral.

You can borrow up to 85% of your home’s value, minus the balance of your mortgage.

Interest rates are often variable.

HELOCs provide flexibility to draw cash as needed for construction.

However, your home is at risk if you default.

Credit score and income requirements still apply.

Crowdfunding/Private Investors

As an alternative, you could crowdfund part of the costs from private investors.

In exchange for contributions, investors may receive equity in the property, interest payments, or revenue sharing.

You maintain more control compared to traditional financing but likely at a higher overall cost.

Extensive business planning is required to attract private investors.

Evaluating each option based on your financial situation and barndominium plans will help determine the best approach to turn your dream into reality.

Speaking with a financial advisor can provide valuable guidance through the process.

Getting a Construction Loan for Your Barndominium

Financing the construction of your barndominium will likely require taking out a construction loan.

A construction loan is a short-term loan used to finance the building or renovation of a home.

It’s different from a traditional mortgage in that the lender will disperse funds gradually over the course of the project, rather than providing the total amount upfront.

To obtain a construction loan, you’ll need:

  • A solid credit score and history of on-time payments.

    Lenders view those with scores over 680 as dependable borrowers.

  • A sizable down payment, typically 20-25% of the estimated total cost.

    The more you put down, the better your interest rate and loan terms will be.

  • Detailed plans and specifications for your barndominium.

    Provide blueprints, budgets, timelines, and building permits to give the lender a clear picture of the scope and timeline of your project.

Once approved for a construction loan, you can expect:

  • An adjustable interest rate, often 1-3 percentage points higher than a traditional mortgage.

    Rates are variable to offset the higher risk the lender takes on during construction.

  • Interest-only payments during construction.

    You only pay the interest charges accruing, not principal.

    Full payments of principal and interest don’t start until the project is complete.

  • Multiple disbursements of funds.

    The lender will release money at certain stages of completion to ensure the project is progressing.

    They retain 10-15% until final inspection.

  • A conversion to a permanent mortgage.

    At the end of construction, you’ll need to obtain a standard mortgage to pay off the construction loan.

    This is known as “converting” the loan.

Obtaining a construction loan requires patience and a willingness to shop around at different banks and lenders for the best deal.

But for turning your dream barndominium into a reality, a construction loan is well worth the effort.

With proper planning and by meeting the lender’s requirements, you'll be picking out finishing touches in your rustic homestead in no time.

Using a Home Equity Loan to Finance a Barndominium

Financing a barndominium can be challenging since construction loans and mortgages for non-traditional homes often come with higher interest rates and down payment requirements.

One option to consider is using a home equity loan.

If you have equity in an existing home, you can borrow against it to finance your barndominium.

How a Home Equity Loan Works

A home equity loan allows you to borrow a fixed amount of money using your home as collateral.

The loan is secured by the equity you have built up in your home.

Equity is calculated by subtracting the amount you owe on your mortgage from your home’s current market value.

The more equity you have, the more you can potentially borrow.

Home equity loans typically have fixed interest rates and repayment terms of 5 to 20 years.

You can use the funds for any purpose, including financing a barndominium.

The interest you pay may be tax deductible.

However, if you fail to repay the loan, the lender can foreclose on your home.

Using a Home Equity Loan to Finance Your Barndominium

To use a home equity loan for your barndominium:

  1. Check your home equity.

    Make sure you have enough equity to borrow the amount needed for your barndominium.

    Most lenders require at least 15-20% equity.

  2. Shop around at different banks and credit unions for the best rates and terms.

    Compare offers from at least 3-4 lenders.

    Look for low fixed interest rates and flexible repayment options.

  3. Apply for a loan and provide financial documentation to verify your income, employment, and home value.

    The lender will appraise your home to determine its market value and how much you can borrow.

  4. Use the loan proceeds to pay for land purchase, construction costs, permits, materials, contractors, and all other barndominium expenses.

    Make sure you have enough to complete the full project.

  5. Repay the loan with fixed monthly principal and interest payments as agreed in your loan terms.

    Be sure to repay on time to avoid penalty fees and protect your home equity.

Using a home equity loan is an affordable way to finance a barndominium if you have equity in your home.

By shopping different lenders and finding the right loan for your needs, you can get the funds to build your dream barndominium with a reasonable repayment plan.

Just be sure to consider the risks, like potentially losing your home if you default on the loan.

If managed responsibly, a home equity loan can be a valuable financing tool.

Paying Cash for Your Barndominium Build

Paying for your barndominium in cash is an appealing option if you have the means.

By avoiding taking on a mortgage, you'll save significantly on interest charges over the lifetime of the loan.

However, coming up with enough cash to fully fund a barndominium build is challenging for most.

Here are some tips to help make paying in cash a possibility:

Save aggressively

Make saving for your barndominium a top priority.

Look for expenses you can trim to put more towards your savings fund each month.

Even small lifestyle changes, like eating out one less time per week or cutting the cable cord, can add up significantly over months and years.

Invest for growth

Don't keep all your cash in a standard savings account.

Look for investment opportunities with higher returns, such as the stock market or real estate.

While risk is involved, the potential for strong returns over the long run can help grow your money faster.

Work with a financial advisor to develop an investment strategy tailored to your goals.

Pay off debt

The less money you have going out each month in debt payments, the more you can put towards saving cash for your barndominium.

Make paying off high-interest debts like credit cards a priority.

Once paid off, roll those monthly payments into your barndominium savings fund.

Consider alternative funding sources

You may be able to generate cash from other sources, such as selling valuable assets like a rental property or recreational vehicle you no longer use.

You could also consider taking out a home equity line of credit on your current home or doing a cash-out refinance to pull money out for your barndominium.

While borrowing does come with interest charges, the rate may be lower than other financing options.

Buy land first

If buying land for your barndominium outright is within your budget, do that first.

Then you can save up for the actual barndominium construction while your land value potentially appreciates over time.

When ready to build, you'll already own the lot free and clear, significantly lowering your overall cash requirement.

With diligent saving and the help of smart financial strategies, paying cash for your barndominium dream can become a reality.

Stay focused on your goal, make a realistic plan, and work that plan to build wealth over time so you can fund this life-changing project with cash.

The financial freedom you'll gain will make all the effort and sacrifice worthwhile.

Creative Ways to Save on Your Barndominium Costs

To finance your barndominium build within budget, explore some creative ways to reduce overall costs.

Buy Materials in Bulk

Purchasing building materials in large quantities, especially those used extensively like wood, concrete, and roofing, can significantly lower costs.

Look for wholesale or contractor rates on lumber, siding, flooring, and other supplies.

The more you buy at once, the bigger the potential savings.

Do Some Work Yourself

If you have experience with construction, consider doing portions of the work yourself to avoid labor fees.

Tasks like framing walls, installing flooring or siding, painting, and trim work can potentially save you thousands of dollars in contractor costs if done DIY.

Make sure you understand building codes and installation requirements first.

Choose an Efficient Design

An open-concept layout with minimal interior walls will require less time and money to build compared to a design with many separate rooms.

Opt for standard ceiling heights and minimal custom features.

A simple, box-shaped structure is the most cost-effective.

Reuse and Repurpose

Using recycled, reclaimed, or repurposed materials, when possible, can dramatically lower costs.

Things like wood beams, flooring, doors, windows, plumbing fixtures, and decor are ideal for reusing.

Check architectural salvage yards, online listings, and demolition sites for materials to reuse in your own barndominium.

Hire a Consultant

Working with an experienced barndominium consultant or coach can help identify ways to optimize your budget.

They know the most affordable material sources, design efficiencies, and building strategies to save money.

Their guidance can potentially save you tens of thousands of dollars, even after paying their consulting fees.

Following these practical tips for lowering costs through resourceful and efficient means will help make your dream barndominium a reality, even on a tight budget.

Carefully planning each stage of the build and sticking closely to your financial targets will be key to avoiding unforeseen expenses that threaten to derail your plans or delay completion.

With determination and creativity, you can achieve an attractive barndominium home at a price you can afford.

Barndominium Financing FAQs

Do I need a large down payment?

Typically 20-30% of total project costs.

The more you put down, the better the terms and interest rate you can secure.

How long does the process take?

Several months to over a year for construction loans.

Start planning well in advance of your target build date.

What fees and closing costs should I expect?

Appraisal, origination, and application fees, typically 2-5% of the loan amount.

Also, title searches, inspections, and insurance fees.

Will I need building permits and plans?

Yes, detailed house plans, permits for electrical, plumbing, and construction will be required to obtain financing and build your barndominium.

What are the interest rates?

Rates vary but may be 0.5-1% higher than a standard mortgage, depending on factors like your credit score, loan-to-value ratio, and current market rates.


You now have the tools and knowledge to make your dream barndominium a reality.

By exploring various financing options, crunching the numbers, and creating a realistic budget, you can achieve homeownership in a unique and affordable way.

While building a barndominium certainly isn't easy, the rewards of crafting your own custom space far outweigh any challenges along the journey.

With hard work and perseverance, you'll be enjoying s'mores in your new backyard or cozying up next to the fireplace in no time.

The possibilities are as endless as your imagination.

Take that first step today - your dream barndominium awaits!

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