Tiny Home Mortgage in Winnipeg - What You Need to Know
February 9, 2021 | Posted by: Ron Chan
The HGTV trend has spawned tiny houses throughout Canada. Winnipeg has embraced the concept, with mini-homes popping up in every nook and cranny of our city’s limits. Sustainability and affordability are the primary driving forces, but even though the latter is often true, some buyers prefer not to take out a personal loan and instead opt for a mortgage. Is getting a mortgage on a tiny home any different? Yes and no. Let’s review.
5 Things to Consider When Getting a Mortgage on a Tiny House in the Greater Winnipeg Area
1. Does it Meet the Definition of a Home?
For the most part, tiny houses in the Winnipeg area meet traditional residential building codes and therefore the mortgage process won’t be any different. However, some developments are unique and do not comply with said codes. For instance, if the house is not set on a permanent foundation it may instead be classified as a mobile home or even a recreational vehicle (if it has wheels). If located in designated rural areas (as some are) zoning for “residential”, “agricultural”, and “country residential” will factor into how a lender assess the risk. When looking at options be sure to clarify with a real estate agent or builder as to how the mini-home is classified with regulatory bodies.
2. Proportionate Risk Assessment
If you’re buying a tiny home for pure financial reasons lenders will look closely at your income and credit history. After all, the “affordability” of tiny home is relative to financial status and it may raise eyebrows in the offices of big banks. A lender does not look at a tiny home mortgage as any less risky when a buyer’s downpayment is equal to or less than 20% and their income is proportionately equal to that of an average buyer buying an average priced property (approximately $300K) in Winnipeg. Like with any mortgage pre-approval, income and credit history are just as important despite the lower price tag.
3. HELOC if Tiny House is a Second Home
Some buyers are looking for a tiny house as a second home. It makes for a perfect vacation property and rental investment opportunity (more on this below). When this is the case you can instead consider a home equity line of credit (HELOC) over a traditional mortgage. You can leverage existing equity instead of tapping into your liquid coffers.
4. Can Pay for Itself on the STR Market
If the tiny-house is a second home OR you’re able and willing to vacate it during long weekends and holidays you can place it on the short term rental (STR) with great success. Tiny homes are extremely popular on vacation rental sites such as Airbnb and VRBO. By renting it out just once per month you can pay off the mortgage quite quickly.
5. A Mortgage Broker Makes it Easier
As you can see, what a tiny home skips in square footage it does not also bypass when it comes to red tape. In fact, there may be more as any divergence from the norm always makes a lender look twice. For this reason you will want to partner with a mortgage broker. A broker will assist with everything from pre-approval to closing, and more importantly can connect you to lenders willing to offer competitive rates. After all, you should be rewarded for being financially and sustainably savvy. Some lenders are even actively looking to get involved in tiny home financing as it becomes a key marketing advantage for them. Whatever the case may be a mortgage broker will manage the entire process for you and connect you to the most appropriate lender/s.
Contact Winnipeg mortgage specialist Ron Chan at 204.222.9950 to get started.