Tiny House Financing Canada

Everything You Need to Know to Find the Best Financing for Your Tiny House in Canada

Tiny houses have surged in popularity across Canada, offering an affordable, sustainable, and minimalist alternative to traditional homeownership. With average home prices hovering around $698,000 (as reported by the Canadian Real Estate Association in March 2024), tiny houses—typically under 500 sq/ft—present a compelling option, often costing between $100,000 and $200,000 depending on features and finishes. However, financing a tiny house isn’t always as straightforward as securing a mortgage for a conventional home. Traditional lenders often hesitate due to size restrictions, mobility, and perceived resale risks, especially for tiny houses on wheels. Fortunately, there are viable financing paths tailored to tiny homes in Canada. This article breaks down everything you need to know to find the best financing option for your tiny house dream, from understanding the challenges to exploring specific loan types and practical steps.

Financing Options

We are proud to offer financing for all of our Canadian customers through third party partners. The type of loan will depend on the land situation and also on the type of use you will make of your product. Here are the possible types of loans for a Minimaliste tiny house on wheels in Canada:

Option 1 : RV loan

For the models on wheels, there is a possibility for all Canadian residents to get a Recreational Vehicle (RV) loan with a 10% to 20% down payment, on a 20 years term, interest from 6% to 9%, depending on the model width. The monthly payments will vary from 1,000$ to 2,000$, depending on the model and down payment.

Option 2 : Traditional mortgage

It is possible for all Canadians to obtain financing for our tiny houses with a traditional mortgage, with a possibility of a CMHC loan insurance. This applies to all of our modular models, but if you are in the province of Quebec, the same applies to our models on wheels if they are installed on an owned property and secured to the ground on a foundation (helical piles or else).

Option 3: HELOC

If you are looking for a secondary home OR if you plan on installing an accessory dwelling unit (ADU) to your existing property, a home equity line of credit (HELOC) can perhaps be the best option. You will use the value of your actual property to leverage financing for your tiny house project. Contact your bank in order to learn more about this option.

Option 4: Commercial Lease Financing

What is lease financing?

Rental leasing, also known as leasing or lease financing, is a financing solution that allows you to use an asset (typically furniture, equipment, or even a tiny home) without owning it, in exchange for monthly payments. It’s especially advantageous for entrepreneurs in the short-term rental industry (Airbnb, vacation rentals, etc.) as it helps preserve cash flow while outfitting properties with quality furnishings and equipment.

How It Works

Leasing is a contract between a financing company (the lessor) and the operator (the lessee). The lessor purchases the asset selected by the lessee and rents it out for a fixed period. At the end of the contract, the lessee generally has three options: purchase the item at a predefined residual value, return it, or renew the lease. The residual value is often symbolic.

Benefits for Short-Term Rental Hosts

• Cash Flow Preservation: No need for large upfront investments to furnish or equip a property.
• Flexibility: Equipment can be regularly updated, maintaining a high standard of comfort and style—crucial for guest satisfaction.
• Tax Optimization: Lease payments are typically deductible as business expenses.
• Access to High-Quality Assets: New, high-performing equipment with fewer breakdowns or maintenance issues.
• Simplified Management: Some contracts include maintenance or replacement in case of malfunction.

Final Thoughts

In short, leasing is a strategic tool for hosts aiming to professionalize their offering and enhance the guest experience without tying up significant capital. Practically, it enables rental operators to scale their business and improve their offerings without heavily impacting cash flow.

Available in Canada and USA

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Why Financing a Tiny House Is Different

Tiny houses (especially on wheels) don’t fit neatly into the traditional mortgage framework. Most banks require homes to meet minimum size standards (often 500+ square feet), be built on permanent foundations, and comply with local building codes—criteria many tiny homes, especially those on wheels, fail to meet. Additionally, lenders set minimum loan amounts (typically $50,000-$100,000) that exceed the cost of many tiny homes, making mortgages on wheels impractical. The resale value of tiny homes is another hurdle; banks view them as riskier investments due to a limited market and potential depreciation, particularly for mobile units classified as RVs. Zoning laws further complicate matters, as municipalities vary widely in their acceptance of tiny homes, affecting where you can legally place them.

Despite these challenges, the growing tiny house movement has spurred alternative financing options. Whether you’re eyeing a mobile Nomad-style unit or a semi-permanent model on a foundation, here’s how to navigate the landscape and secure the best financing for your needs.

Key Financing Options in Canada

1. RV Loans
   If your tiny house is on wheels and certified as a recreational vehicle (RV) by organizations like NOAH or the Recreational Vehicle Industry Association (RVIA), an RV loan is a strong contender. These loans are widely available through banks, credit unions, and specialized lenders, treating your tiny home like a motorhome or travel trailer.
   
   • Pros: Terms can extend up to 20 years, keeping monthly payments manageable. Interest rates typically range from 4% to 8%, lower than many personal loans. Approval is often faster since the home serves as collateral.
   • Cons: You may need a down payment (0%-20%, depending on the lender), and if you default, the lender can repossess your home. Payments might start before delivery if ordered through a builder like Minimaliste.
   • Best For: Mobile tiny homes like Minimaliste’s Nomad series, where no down payment is an option for Canadian residents, with rates from 4.99% to 6.99% over 20 years.
2. Personal Loans
   Unsecured personal loans are versatile, letting you borrow $1,000 to $100,000 without tying the loan to your tiny house. Online lenders like SoFi or LightStream, and Canadian banks or credit unions, offer these with terms up to 7-10 years.
   
   • Pros: Flexibility to use funds for the house, land, or furnishings. Quick approval (sometimes within days) if you have good credit. No collateral risk.
   • Cons: Interest rates vary widely (6% to 36%), with higher rates for lower credit scores. Shorter terms mean steeper monthly payments. Extra fees (origination, late payment) can add up.
   • Best For: Buyers with solid credit (660+) seeking a fast, flexible option without a down payment, or those building a DIY tiny home from a kit (e.g., Home Depot kits starting at $20,000).
3. Builder Financing
   Many Canadian tiny house builders, such as Minimaliste or Mint Tiny House Company, partner with lenders to offer financing directly. These can mimic RV loans or mortgages, depending on the model.
   
   • Pros: Streamlined process through the builder. Potentially lower rates or incentives (e.g., Minimaliste’s 4.99% RV loans). Longer terms (10-25 years) for affordability.
   • Cons: Requires a down payment (e.g., 10% for Minimaliste’s semi-permanent models). Limited to specific builders’ offerings. May not be the cheapest if you skip the middleman.
   • Best For: Buyers committed to a specific builder’s design, like Minimaliste’s RV-certified units or Mint’s custom homes, especially if land is secured.
4. Mortgage (Regional Option)
   In Quebec and Ontario, a traditional mortgage is possible for tiny homes on foundations, especially with CMHC insurance. Minimaliste notes this requires a 5% down payment and land ownership or a long-term lease (5+ years) with services (water, septic, electricity).
   
   • Pros: Lowest interest rates (often under 5%) and terms up to 25 years. Familiar structure for homeowners.
   • Cons: Limited to two provinces. Strict land and construction requirements. Not viable for mobile units.
   • Best For: Quebec or Ontario residents with land, seeking a permanent tiny home setup.
5. Home Equity Loans or Lines of Credit (HELOC)
   If you own a home with equity, borrowing against it can fund a tiny house, either as an accessory dwelling or standalone unit.
   
   • Pros: Low rates (often 3%-7%) and long terms (10+ years). Adds property value if kept on-site.
   • Cons: Requires existing home equity. Risks your primary residence if you default. High minimum loan amounts may not suit tiny budgets.
   • Best For: Homeowners adding a tiny house to their property, not first-time buyers.
6. Alternative Options
   • Credit Unions: Some, like First Tech, offer specialized tiny house loans with flexible terms.
   • Family/Friends: Borrowing informally with a written agreement avoids bank hurdles but requires trust.
   • Cash: Paying upfront eliminates debt, ideal if you can save $20,000-$60,000, though land costs add up.

Factors to Consider When Choosing Financing

• Credit Score: A score of 700+ unlocks lower rates on personal or RV loans.
• Budget: Builder manufactured tiny homes can range anywhere from $75,000 to $200,000+. You also need to take into consideration the shipping cost, site preparation (water, septic, electricity) and installation.
• Mobility vs. Permanence: Anything mobile will be classified as an RV for financing and bylaws. Permanently installed units can qualify for mortgages and are also preferred by municipalities.
• Location: The zoning of the property will dictate whether a tiny house on wheels (classified as a recreational vehicle) can be installed on your property OR if you need to apply for a building permit and install the tiny home on a foundation (helical piles or concrete crawl space).

Steps to Secure the Best Financing

1. Explore Land Options: Own land or secure a lease before applying—lenders favor stability. Rural plots start at $10,000; RV parks offer short-term spots.
2. Assess Your Needs: Decide on mobility, size, and land ownership. A mobile unit or a fixed unit? This shapes your loan type.
3. Check Your Finances: Review your credit score, savings, and income. Aim for a 20% down payment if possible, but keep in mind that a traditional mortgage can be possible with only 5% if you have the mortgage loan insurance.
4. Research Lenders: Contact us to get in touch with our lending partners, whether the project is on wheels or on foundation.
5. Get Pre-Approved: Apply with your top lender to lock in rates and terms. Provide proof of income, credit history, and land details if applicable.
6. Shop Tiny Homes: Choose a certified builder (e.g., NOAH/RVIA-approved) to ensure financing eligibility. Customize within your budget.
7. Finalize and Insure: Sign the loan, order your home, and secure insurance (RV for mobile, homeowner’s for fixed).

Final Tips for Success

• Compare Rates: A 1% difference on a $50,000 loan saves thousands over 20 years.
• Plan for Extras: Budget for towing (if mobile), hookups, or off-grid systems.
• Test the Lifestyle: Rent a tiny home first to confirm it’s right for you—downsizing can be a shock.

Financing a tiny house in Canada may seem difficult, but the payoff—affordable, eco-friendly living—is worth it. Whether you opt for an RV loan’s simplicity, a personal loan’s flexibility, or traditional mortgage, aligning your choice with your goals and resources is key. Start today by checking your credit and reaching out to us—you could be in your tiny home sooner than you think!