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Buying a shipping container home

How you can finance your home depends on your down payment and the lender you choose.

Due to their low cost and fast build time, shipping container homes are growing in popularity. But finding a lender to finance a container home can get a little complicated – after all, they’re not your typical real estate. Lenders are often unwilling to finance unconventional homes due to lack of foundations or the possibility that it doesn’t meet local or regional standards. If you can find a lender willing to work with you, they will usually require a 20% down payment and you’ll typically need to own the land – as well as meet local dwelling standards.

What is a shipping container home?

A shipping container home is a type of modular or prefabricated (prefab) home that is manufactured off-site in a factory environment.

The modular unit is comprised of shipping containers that have been refitted for use as a home. The unit is then transported to the property location, where it’s either assembled by tradespeople or by the property owner.

Shipping container homes can be customized to fit specific size and design requirements, and you can attach several containers together to make a larger home.

Are shipping container homes safe?

Most new shipping container homes can weather almost any storm because they’re made of steel — which means they’re more stable than some houses.

But used shipping containers can be riskier. If the container was exposed to chemical spills, the structural integrity can be weakened. Plus, containers built for shipping goods often use industrial paints and are sprayed with insecticides, which can be a health hazard.

Pros and cons of shipping container homes

Pros

  • Construction time. A container home has a relatively short construction time and can be assembled within a matter of months. The automated construction of prefab homes provides you with greater certainty as the construction process isn’t subject to delays by weather conditions.
  • Personal design. You can customize the size and design to suit your location and lifestyle needs.
  • Lower ongoing costs. Generally, a container home will require less maintenance as it will be resistant to extreme weather conditions and structural defects.
  • Carbon friendly. The automated production process and the structurally sound materials used to build a container home have a lesser impact on the environment, which can help minimize waste. For instance, most container homes are fully insulated with double-glazed windows which can help you lower your utility bills.

Cons

  • Transportation cost. Depending on the location and whether or not there is easy access, transporting the container home to the property site can be expensive. Depending on the nature of the job, the unit may need to be transported by a hydraulic lift, which can be costly.
  • Difficult to access financing. Due to the unconventional nature of shipping container homes, many lenders will view you as a risky borrower and may impose strict guidelines for a construction loan. This can make it harder to access the funds you need to build your container home – or get a piece of land.

How much does it cost?

Depending on the size, structure and design, a shipping container unit could range from just a few thousand dollars for an empty container that you plan to renovate yourself to hundreds of thousands for a large home fully outfitted and made out of several containers. Some homeowners report paying anywhere from as little as $20,000 to as high as $200,000 for a shipping container home.

Remember that you’ll also need to purchase a piece of land to put your shipping container home on. You may also incur extra costs clearing the land or flattening it, accessing and hooking up to local utilities, as well as delivery and/or assembly fees for your new home.

Compare several quotes before deciding on a shipping container provider to ensure that you’re getting the best deal – and a clean, undamaged and uncontaminated container.

How to finance a shipping container home

How you finance your home depends on how you build it.

Building a new container home

If you’re building a new shipping container home and you own the land, your best bet to get financing would be the following:

  • Home equity loan or line of credit. With competitive rates and terms, you could draw on equity that you own in your current home. While this is risky since you’ll lose your current home should you default on your payments, you could potentially lock in competitive rates and terms. This is also one of the most accessible types of credit for those looking to tackle an unconventional project.
  • Personal loan. Since a conventional mortgage might not be in the cards, you could take out a personal loan to help pay for some of the expenses. If you’ve got a good credit score, you could be eligible for a loan with rates as low as 4.5%, however rates will vary depending on the lender, the loan term, your credit history and your income.
  • Construction mortgage. Looking to build a shipping container home from scratch? Not many lenders will allow you to take out a construction mortgage to build a shipping container home – but it’s worth asking. This type of mortgage is always secured by the land that your new home will be built on, which means if you default on your mortgage the land can be seized. Should you be eligible for a construction mortgage, you could be looking at the following options:
    • Draw/Progress-draw mortgage. Your builder can draw money from the mortgage throughout the building process, usually at four specified times throughout the build: when the build first begins, 35-40% into the build, 65-70% into the build and at the completion of the build. This type of mortgage may require a 20% down payment, although it will depend on the lender.
    • Completion mortgage. Your mortgage isn’t transferred to you until the build is complete, or until you take possession of the home. With a completion mortgage, you can usually make changes to the mortgage up to 30 days before taking it on, such as request a higher mortgage. To get a completion mortgage, your shipping container builder would have to be onboard with receiving financing once your home is built and in place. This type of mortgage may require a 20% down payment, although it will depend on the lender.

Buying a prefab container home

If you’re buying a container home that’s already fully built and is just being shipped to your land, you may be able to get a regular uninsured mortgage. This means you’ll need to put down at least 20%, as CMHC typically won’t insure a dwelling like this. You’ll also need to make sure the container home will sit on a solid foundation and will meet all local building/dwelling codes and standards.

Consider speaking to a mortgage broker to help you understand your borrowing options. Provide as much detail as possible about your plans and consider approaching specialist or online lenders that may have more lenient lending criteria.

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Is it hard to qualify for financing?

It can be challenging to qualify for financing to construct a shipping container home due to the limited number of lenders who may be willing to finance such an unconventional and new style of home. Lenders tend to be conservative with this type of construction and most lenders won’t let you borrow funds for a property that isn’t permanently fixed to the site or doesn’t meet all building regulations.

While these types of loan applications are handled on a case-by-case basis, you may be able to qualify for financing if you communicate well with your lender, have substantial savings and a reliable income.

Challenges associated with financing a container home include:

  • Strict lending guidelines. Unfortunately, most lenders have strict guidelines about when they can release funds for an unconventional or modular home. Many lenders will not provide funds before a certain building stage has been reached or before proof is supplied of permanent foundations. In some cases, a lender will only provide you with the funds once the home is completely installed and has met all local and regional building codes.
  • Loan security. As banks have no collateral until the home is finished, they can be reluctant to provide progress-draw payments to the builder. Offering up collateral, like a second home or the land your new home will sit on, can help you qualify for a mortgage, loan or a line of credit.

    Bottom line

    Shipping container homes are skyrocketing in popularity, but lenders are a bit slow to catch up to the craze. Compare mortgage lenders to find a provider who can help you build your dream shipping container home. If you’re struggling to find a lender willing to lend to you, consider saving up a bigger down payment or reach out to a mortgage broker who may be able to connect you with the right lender.

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