Financing a Modular Home Purchase

e Basics

So you’re interested in purchasing a modular home, and need to more about how you will nance the project. Financing a modular home is the same in the end as nancing a house constructed on site, but di erent in the middle. Let’s explain.

Traditional Construction

Traditional construction nancing is based on a bank’s ability to secure value in your property through a construction mortgage. For example, If your land is worth $250,000 the bank will start by lending you a portion of that value, then as you proceed through construction and add value to the land at stages such as foundation completion, lockup and occupancy, the bank will send it appraiser to the property and will give you more money against that value.

Modular Construction

e slight di erence with modular construction is where the house is built. In the modular scenario, the home is being built o site at a factory, thus a mortgage lender does not view its construction as adding value to your land. While the bank is still likely to advance funds against a portion of your land’s value, they are unlikely to advance funds against those improvements since they are sitting o site and they cannot securitize against them in the same way that they could if the home was built on site. is means that the o site portion of your build needs to be nanced through alternative means while it’s being built in the factory. Once the house arrives at site, banks are happy to lend against that value in the same way as if it was built there in the rst place.

How to Finance the O site

A conventional construction loan o en does not work for a modular project due to the expedited time frame for a modular build, as well as the fact that the house (aka the modules) are manufactured o site; not directly on your property at rst. A good option for modular nancing is a combination loan with a Line of Credit and a Mortgage. In this scenario, the Line of Credit is secured against the modules, your land and possibly other assets. is money is used to nance the factory construction. Once the modules are transported to site and installed on the foundation the Line of Credit converts to your pre-approved permanent mortgage, sometimes referred to as a Completion, or Take Out mortgage.

For more information contact Ecofab.ca or call 604 989-8184