Thinking of building a Modular home? Construction financing explained.

Real Estate Sales Representative with Berkshire Hathaway HomeServices Toronto Realty


From some of the FAQs from Hive Modular inquiries, we have been looking at financing options with our mortgage broker partner for modular home construction, as a lot of interest is growing in this construction method in the Toronto urban real estate market.  The market place at large has not yet embraced this form of construction so not all institutions are financing these construction projects, and the ones that are will proceed cautiously and still don’t have their “process” well defined – at least in this market. The process and product offering can differ greatly from lender to lender.


Hive Modular X-Line 007 

hive modular




As modular construction becomes more understood and accepted by the marketplace, more robust product offering will be offered by various financial institutions.  


First it needs to be mentioned that the typical Buyer who should be entering into these projects should be individuals who have....


  •  established credit histories with a decent rating
  •  Income that can be fully documented (no equity lending “stated income” programs)
  • Sufficient financial resources beyond the bare minimum so they can handle potential cost overruns, fund construction lien hold backs as the lenders by law will need to hold back 10% of their advances by law (in Ontario) and pre-fund portions of the construction costs or land acquisitions costs prior to receiving funds by the lender.


From our discussion with our mortgage broker partner, the construction financing process for modular homes looks very similar to any typical progress advance construction financing.


Typically the project is appraised to determine the “as complete” value.  The lender and appraiser would need to examine the complete estimate and will need a breakdown of what is being built with what materials will be used.  They will determine what the market value of the finished home will be worth along with the value of the land.  The mortgage is then advanced in stages.



In both the traditional type of construction and modular home construction sometimes an additional advance can be worked in – 50% of the land acquisition cost.  This is approved on a case by case basis and does not fall under the conventional approval process.




Bottom line is that it is necessary to have a good amount of capital to undertake such a project – and the lenders money comes in behind your money. 


If you would like further information on the process of acquiring a Hive Modular home or look for infill property for a project, please get in touch with us, we'd love to help.




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Contact me to find out more about Toronto Design-focused Real Estate Solutions for your needs.


Anne Lok, Real Estate Broker

Berkshire Hathaway HomeServices Toronto Realty Inc. Brokerage

287 Davenport Road Unit 1
Toronto ON M5R 1J9

direct: 416-799-9632

office: 416-504-6133 


Comments (2)

Jason Crouch
Austin Texas Homes, LLC - Austin, TX
Broker - Austin Texas Real Estate (512-796-7653)

It's interesting to hear that modular homes are becoming popular there. I don't think I've ever seen one here in Austin. Cool!

Jan 04, 2014 12:12 PM
Anne Lok
Berkshire Hathaway HomeServices Toronto Realty - Toronto, ON
Toronto Modern Real Estate

Hi Jason- Modular homes have been around for a long time here, the method of construction that is, and mostly in the cottage country as traditional vernacular. Architects designed modern modular home of superior quality are rare. It is still a niche market in Canada east. Hive (based in Minnesota) have now completed their 6th home in Calgary.

Jan 04, 2014 11:00 PM