Mobile, manufactured, and modular homes are different by design — and so are their mortgages.
Prefab homes can still qualify for a traditional mortgage, whether you're purchasing or renewing. Here’s what to know, and how to find the right fit.
Home-sweet-home in Canada can come in many forms. Now prefabricated homes are becoming more popular, and were recently heralded by the federal government as a possible solution to address Canada's housing crunch.
Pre-built home types can offer Canadian home buyers and owners certain benefits, such as faster occupancy, schedule certainty, space and energy efficiency, and easier installation, especially in recreational or remote areas.
If you're looking to buy or renew a mobile, manufactured, or modular home, finding the right mortgage solution may be the key to making it happen or saving more.
And just as you suspect, the rules for prefab mortgage approval are different, and can impact the lender choice available to you. Here's how this financing works.
| Finance on Land Owned? (Traditional Mortgage) | Finance on Land Leased? (Chattel Loan) | |
|---|---|---|
| Big Six Banks (e.g. RBC, BMO, Scotiabank) | Yes, if CSA/local code compliant and meets property standards | Possibly; may be offered through specific programs |
| Mortgage Finance Companies (e.g. THINK Financial, First National) | Yes, as above; may offer more approval flexibility and better mortgage rates and features | No |
| Credit unions | Yes, as above; rates may be higher; mortgage features may be restricted | Possibly, may be offered for local park homes |
| Alternative Lenders (e.g. Home Trust, EQ Bank) | Yes, as above; rates may be higher; mortgage features may be restricted | Possibly, through specialized lenders |
| Private lenders | Yes, more flexible criteria; higher rates offered; mortgage features and terms likely restricted | Yes, though approval criteria may vary |
Unlike a traditional home built on-site, a mobile, manufactured, or modular home is built in a factory, usually to exacting CSA (Canadian Standards Association) standards and transported to be installed on real property (land you own) or leased land as a housing unit.
Despite their controlled factory origin, these prefabricated homes can offer substantial comfort, energy efficiency, and curb appeal. Their standardized and transportable design can provide time, location, and cost efficiencies compared to a site-built home.
A mobile home is typically a single-level, factory-built home on a steel frame that can be moved from one spot to another. It hitches a ride on a specially designed trailer or rolls on its own set of wheels that are often removed after transport.
When you hear 'mobile home,' you may picture living in a mobile home park — a community assembled on leased parcels of land. But a mobile home can also be placed on real property (like a traditionally-built house) in both rural and urban neighbourhoods, as long as it meets construction standards and local zoning rules.
Once delivered to the intended location, a mobile home is usually set on a proper foundation according to building regulations, and insurance and financing requirements.
A manufactured home is the more modern definition of a mobile home, and both terms are often used interchangeably in referring to this home type.
If we get technical, 'mobile' refers to manufactured homes constructed before 1976, built to less formalized standards. After stricter CSA building standards came into effect, the 'manufactured' moniker gained traction in the late 1980s and early 1990s, reflecting the industry's shift from emphasizing portability to highlighting the finished home itself.
Still, the old name 'mobile' has stuck around longer than some of the shag carpet from the era, even though 'manufactured' is now the standard industry term.
Good homes come in small packages? Modular is a type of manufactured home built in sections, levels, or modules at a factory, then assembled on-site like a life-sized Lego set, with sections or levels securely fit together to produce a whole house (or a complex offering multi-unit density).
The flexible and adaptable nature of modular homes allows buyers to piece together a dream abode suited to their needs, budget, and property size.
Modular may sound new, but the notion has been around in Canada since the World War I era. First used for military or commercial purposes, this concept morphed into mass-produced, precut designs during WWII to tackle severe housing shortages, and in the 1950s–60s, evolved into larger, factory-built modules craned into place on a foundation.
Evolving building technology, labour shortages, inventory concerns, and sustainability goals are driving its modern use today for more affordable and efficient housing.
Emerging in the 1940s and built for returning WWII veterans and their families, these small, boxy, one-and-a-half-storey houses were quick to build and affordable, using precut materials and some prefabricated parts.
Distinctly Canadian, these homes were the result of mass-produced designs by Wartime Housing Limited, and are considered some of the earliest prefab housing examples, even though they were built on-site.
Many still stand in Canadian neighbourhoods today. (Hey, were these homes the inspiration for Ikea furnishings??)
Called Victory or Strawberry Box homes, their simple shape resembled the cartons strawberries once came in. 🍓
Mobile, manufactured, and modular home types present different risk factors for lenders, especially if the homes are on leased instead of owned land.
Here's what mortgage lenders look at when considering a prefab home:
In addition to meeting specific prefab home and property standards, your mortgage approval is also subject to your financial details.
Traditional prefab mortgage approval offered by big banks may offer less flexibility in saying 'yes' to your application compared to non-bank or alternative and private lenders.
A traditional mortgage is for prefab homes assembled on real property (land you own) and can be offered by big banks, non-bank lenders, or alternative or private lenders. The land secures the loan, giving the lender recourse in the event of default. While specific property criteria must be met for approval, the prefab mortgage typically works the same, often with the same terms and features as the lender's 'regular home' mortgage.
A chattel mortgage (also referred to as a chattel loan) is used for moveable homes on leased land. It works more like auto financing — the home itself is the collateral. Because there's no land title to secure it, the home is treated as personal property and a depreciating asset, which usually means a shorter loan length (amortization) and a higher interest rate.
Less widely available and not usually considered a standard retail mortgage product, you may be able to get a chattel mortgage through a big bank (e.g. Scotiabank), credit union, or alternative or private lenders, depending on your details.
Through True North's in-house lender, CMHC-approved THINK Financial, a prefab mortgage doesn't incur additional lender fees compared to a traditional home mortgage.
However, some lenders (including THINK) may require a prefab home inspection, which is a fee typically covered by the home buyer/owner.
Other lenders may charge extra fees for a prefab financing process (please check with your lender of choice).
Chattel loans must be registered under provincial Personal Property Security Legislation (PPSA), and you may need to cover this fee. Other fees may be charged based on the nature of the agreement and loan application.
The federal government has pledged to support the manufactured and modular home industry to help build homes faster by encouraging municipalities to reduce red tape and through government funding initiatives.
Because a mobile home park sits on leased land that you rent instead of own, mortgage options through a traditional lender may be limited or unavailable.
Alternative and private lenders may offer a financing solution (referred to as a chattel loan or mortgage), though it may come with higher rates, restricted mortgage terms, and a shorter repayment period.
A bank or mortgage lender can't use leased land as collateral to secure your mortgage loan, unless a specific arrangement has been made with a land developer. There is no home title registered; instead, your home is registered as personal property, similar to an auto loan.
The home itself, without the land security, may not hold enough resale value over a typical traditional mortgage amortization to placate a lender's risk appetite. If default occurs, your home would likely be confiscated, and you would need to find other sources to compensate the lender for any shortfall — a lending situation that implies higher risk and potential loss for the lender.
Leased land can also be fraught with other uncertainties, for example, if the land is suddenly put up for sale and the buyer decides to evict the existing homes.
A chattel loan for a leased setup comes with stricter criteria and higher borrowing costs to help address the increased lending risks.
If the home is not yet installed and you need financing to get it done, you may require a different kind of mortgage, like a construction or draw mortgage.
True North doesn't supply construction mortgages for prefab homes. However, other options may be available, such as a completion mortgage (you'll need to sign a purchase agreement and provide a deposit to the developer that will go towards your down payment), or you can apply with THINK once the house is within 120 days of being finished (subject to eligibility and conditions).
Read more about construction and completion mortgages here: New Build Mortgages
Not necessarily. Many prefab home companies, especially modular builders, aren't yet producing factory homes to scale.
Meeting current demand, the focus is on delivering a quality product, as the wait continues for zoning regulations to be eased in more city centres across Canada.
Canadian prefab companies (such as Eagle Homes, Nelson Homes, and Modern Modular) may offer choices ranging from modest to luxury builds, similar to traditional on-site home builders — keeping in mind that you still need to pay for the land. So the cost can hinge on what you buy, and where you install, your home.
Some mobile and manufactured homes may cost about 10–40% less, square footage to square footage, compared with typical on-site builds — thanks to efficiencies in factory production and reduced on-site labour.
The more these factory home builders can scale capacity, the more affordable these home types might be compared to on-site builds. And that solution lies in how easily areas, towns, and cities allow prefab homes to be installed in their communities.
Increased inner-city use is likely to have the most impact on affordability. Centres such as Edmonton and Calgary have cleared some prefab red tape. However, the Vancouver and Toronto areas, Canada's most price-stretched markets, have yet to ease zoning roadblocks — fuelled by NIMBY-ism (not-in-my-back-yard) and dependence on development-related revenue — to encourage more affordable homes as an option.
Calculate your home affordability here.
They could, though the pre-built housing industry faces obstacles in making this claim, namely in the form of civic resistance to increased home density in residential neighbourhoods.
Canada's housing is down by over 5 million homes needed by 2030 (on top of annual construction). Our nation faces many challenges in its home-building pace, including labour shortages and rising home-building costs.
Prefab can make the build process faster and more efficient — putting more roofs over Canadian heads, sooner. And prefab home builders would love nothing more than to help out.
'Home' can come in many forms — like one that rolls fresh off the highway into your dream neighbourhood or comes in smaller pieces that fit together like a (much more substantial) Barbie set.
You don't have to stick to traditional home options to reach your homeownership goals. At True North, our highly trained, salaried brokers have the flexibility to help you find the prefab mortgage solution that best fits you, with rates and options that can help you save thousands.
Disclaimer: Any companies or organizations mentioned or linked to in this article are provided for informational purposes only. Their inclusion does not constitute an endorsement, and True North Mortgage is not responsible for the content, products, or services they provide.
Buying with family may help you afford a home and share other perks.
Get the best start and save a pile of cash with our mortgage experts.
Don't fit the mortgage mold? We may have the right solution to help you move on.
