Tiny homes have become incredibly popular over recent years, and for good reason: they’re economical and flexible without sacrificing all the comforts of home. However, they still cost a few thousand dollars, which you might not have readily accessible. Thankfully, there are plenty of tiny home mortgage options available to help you cover the cost of a tiny home purchase in Canada.
Let’s take a look at them all to help you determine which option is most suitable for you.
Can You Finance A Tiny Home With A Regular Mortgage?
A conventional mortgage is typically designed solely for traditional real estate, which does not usually include tiny houses. Lenders usually have certain criteria that homes must meet before they hand out mortgages to finance these purchases.
For example, the home may have to be built upon a fixed foundation. Plus, lenders may have minimum loan amounts. Since tiny homes can be bought for as little as $10,000, you may not have much luck getting a lender to approve a mortgage for so little.
If you need financial assistance to buy a tiny home, you may need to look at alternative loan products, which we’ll get into next.
See How Much You Qualify For
What Is A Tiny Home?
Just as the name suggests, a “tiny home” is one that’s much smaller in size than the average house. More specifically, a tiny house can be defined as a residential dwelling that does not exceed 400 to 600 square feet, though some may be as big as 1,000 square feet.
In order for all of a home’s amenities to fit, every square inch of a tiny house must be strategically allocated. That said, these homes feature all of a traditional home’s comforts, just in a much smaller space.
This includes all the typical utilities that you’d typically see in a regular house, such as electricity, natural gas, and running water. However, many tiny homeowners are able to live off-grid without access to electrical or water supplies thanks to features like rainwater catch basins and filtration systems, solar panels, and composting toilets.
How Much Does A Tiny Home Cost In Canada?
Tiny houses cost a lot less than traditional homes given the significant difference in size. Having said that, the exact cost can vary quite a bit from one tiny home to another depending on a few factors, including whether you build the home from scratch or purchase a pre-existing home.
The cost also depends on where you’re located, as each jurisdiction has its own specific regulations when it comes to building residences.
Cost Of Pre-Built Tiny Homes In Canada
Generally speaking, the cost of a pre-built tiny home ranges from anywhere between $10,000 to as much as $150,000. In addition to the cost of the actual dwelling itself, there are other standard costs that come with buying a tiny house:
| Land purchase | As much as $200,000 or more, depending on location |
| Land lease | Around $500/month, + water & electricity hookup fees |
| RV registration fee | $20 – $200/year, depending on local regulations |
Cost Of Building Your Tiny House
The cost of building a tiny home ranges from $10,000 to $40,000. However, keep in mind, that building your own tiny house takes a long time, so you’ll be waiting a lot longer to move into your home than you would if you bought a pre-existing home.
If you choose to build a tiny house, there are prefabricated home kits available that you can put together for under $10,000. Or, consider hiring someone to put it together for you. There are a variety of costs that will go into building a tiny house, such as:
- Lumber
- Doors and windows
- Roofing
- Siding
- Insulation
- Interior wall panels
- Flooring
- Lighting
- Water heater
- Electrician and plumber hookups
- Bathroom fixtures and appliances
- Kitchen counters, cabinets, and appliances
The final price tag will come down to the types of finishes and materials you choose to build your tiny home.
Thinking of renovating your tiny home? Find out if you qualify for a home renovation tax credit.
Other Tiny Home Mortgage Alternatives
Instead of applying for a traditional mortgage to finance the purchase of a tiny home, there are other sources of financing available. The type you choose will depend on the amount you need to borrow, the exact type of house you’re buying, and your financial and credit profile.
Tiny Home Mortgage Alternative 1. RV Loans
If the tiny house you’re buying can be classified as an RV — which means it’s portable and perched up on wheels — then an RV loan might be most appropriate. An RV loan provides you with a lump sum of money upfront for you to use to buy the home. Then, you repay the loan amount, plus interest, in installment payments.
Pros
- Collateral – You can use your tiny home as collateral for these loans, which means you may qualify for a higher amount or lower rate.
- Low Payments – Long-term financing is also available to help you keep your monthly payments low.
Cons
- Safety Regulations – The downside to an RV loan is that your tiny home will likely have to meet certain safety criteria and be certified by the Canadian Recreational Vehicle Industry Association to qualify.
Tiny Home Mortgage Alternative 2. Chattel Mortgage
A chattel mortgage is a loan designed to finance a moveable personal property, including a tiny home. These types of loans are more like auto loans than traditional mortgages. In this case, the lender will technically own the structure until the loan is paid off in full.
The great thing about chattel mortgages is that the interest rates associated with them are usually lower than personal loans and are easier to qualify for. If your tiny home is not moveable, however, it may not qualify for a chattel mortgage.
Pros
- You Plan To Move Often – Whether you plan to move often or park your tiny home on a piece of land you bought, a chattel mortgage can be the most suitable option.
- Flexible Payments – Niche mortgages like chattel mortgages typically have shorter payment periods and more flexible repayment options.
Cons
- Hard To Find – It can be difficult to find a bank or online lender who offers chattel mortgages.
Tiny Home Mortgage Alternative 3. Personal Loan
You may qualify for a personal loan if you have the finances and credit scores to qualify. Like a traditional loan, a personal loan provides you with a chunk of money that you use to pay for the home, after which installment payments are made on a regular schedule until the loan amount is paid in full.
Pros
- Long Terms – Personal loans come with loan terms ranging from as little as 6 months to 10 years. This will allow you to spread your costs according to your financial situation.
- Versatile – The funds from a personal loan can be used in any way you see fit, including covering the cost of upgrades.
Cons
- High-Interest Rates – Interest rates can be higher with unsecured personal loans, especially if you have bad credit.
Tiny Home Mortgage Alternative 4. Line of Credit
A line of credit works similar to a credit card. You’ll be approved for a specific credit limit, and you can withdraw from your account as often as you wish, as long as you don’t go over your limit. Once you repay what you’ve withdrawn, you can borrow that money again.
Pros
- Instance Access – Having access to a line of credit means you don’t have to re-apply for a loan whenever the need for extra funds arises. That means you can tap into your line of credit whenever you need to upgrade your home, or for other purposes unrelated to your house.
- Minimum Payments – With a line of credit you don’t have to pay the balance until the draw period ends. Till then you simply need to make the minimum payment to keep your account in good standing. This will give you more control over your payments.
Cons
- The credit limit on your line of credit may not be enough to cover the cost of a more expensive tiny home.
Home Equity: Home Equity Loan Or HELOC
If you’re already a homeowner and have built some equity, you may be able to access that equity to cover the cost of buying a tiny house.
Home Equity Home
With a home equity loan, you’ll be given a lump sum of money accessed from your home’s equity. Then, you’ll pay back what you borrowed through installment payments.
Your home will be used as collateral for this loan, so it’s important that you keep up with your payments or you risk losing your home. Moreover, due to the added security of the collateral, you may qualify for a lower interest rate and longer terms.
HELOC
With a home equity line of credit — or HELOC — you’ll have access to a credit account, much like a line of credit as already discussed. This time, your home equity is being used to back this account. This means it may be easier to qualify for and your rates may be lower. Like the line of credit, you can access the funds any time and you regain access to the funds as you repay them.
Which Should You Choose?
Ultimately, this decision is up to you and how you plan to purchase or build your tiny home. That being said, if you plan to purchase a fully built tiny home, a home equity home may be the better option. That’s because you will receive a lump sum of cash. On the other hand, if you’re going to build a tiny home over the course of several months or years, a HELOC will likely be a good option for you. With a HELOC you can use your account to purchase building materials as you needed.
Costs To Consider When Financing A Tiny Home
Much like a traditional home, there are several costs that come with both purchasing and operating a tiny house:
- Upfront costs. In addition to buying the actual structure, you will have to pay for (or lease) the land that the home sits on. And if you decide to build the home, you’ll need to cover the cost of materials and the builder (if you hire one).
- Parking and fuel. If you buy a mobile tiny home, you’ll need to pay for parking fees whenever you stop. Plus, you’ll be using a lot of fuel to transport your home.
- Insurance and taxes. Depending on the exact type of home you purchase, you’ll need some sort of insurance policy to protect it. And don’t forget about property taxes (if applicable) and permit fees.
- Utilities. Unless you’re living off-grid, there will be utility costs involved to operate your tiny home, including gas, electricity, and water.
Tiny House FAQs
Are tiny homes legal in Canada?
What’s the difference between a tiny home and an RV home?
Can I finance my tiny home through my tiny house builder?
Final Thoughts
A tiny house may be a great idea if you’re comfortable with a much smaller footprint. And if you don’t have the financial capability to purchase a traditional home. Whether you decide to buy a pre-built tiny home or prefer to have one built for you, there are a few financing options available to help you make this purchase.
