CMHC expands mortgage options to boost modular construction

Key Takeaways:

• CMHC has expanded its mortgage insurance portfolio to include specialized financing for prefabricated and modular homes.
• The new CMHC Prefab Plus program for individuals uses a four stage draw system to better align with factory built construction schedules.
• The corporation is now allowing modular construction for all multi unit insurance products to help developers reduce project timelines by up to 50%.

The Whole Story:

Canada Mortgage and Housing Corp. (CMHC) updated its mortgage loan insurance offerings to include new options for prefabricated and modular homes. The changes are intended to address a national housing supply gap by supporting construction methods that reduce building timelines and improve residential productivity.

The federal corporation has introduced the CMHC Prefab Plus program, which enables homebuyers to purchase factory-built residences with a minimum 5% down payment. Unlike traditional lump-sum mortgage disbursements, the program provides funding in up to four draws as specific construction milestones are reached. This staggered financing supports the unique technical sequencing of off-site builds, including land acquisition and site preparation, delivery of the prefabricated unit, and final on-site installation.

For example, a homebuyer can take a draw to acquire and prepare their property for a prefabricated home, then take another once the home is delivered and ready to be installed on their property. This allows CMHC Prefab Plus to better support the sequencing of prefabricated home construction.

For large-scale developments, CMHC is extending modular construction eligibility to all multi-unit mortgage loan insurance products, including MLI Select. This decision follows a pilot initiative that supported more than 800 new rental units across five provinces. A specific project cited by the corporation is 605 Studio West in Calgary, an 84-unit affordable housing development that utilized modular methods to achieve occupancy in less than 12 months. A comparable conventionally built project in the same region would typically require nearly two years to complete.

“By offering mortgage loan insurance for the financing of prefabricated homes and multi-unit modular construction, CMHC is committed to expanding access to homeownership and supporting the development of rental supply,” said Coleen Volk, CMHC president and CEO.