If you have or have ever wanted an outbuilding on your property, you know that they have been tricky to finance. There are many different types, requirements and uses associated with them, and in the past, banks have been leery of valuing them as part of a mortgage. Let’s take a deeper dive into what is considered an outbuilding and how valuation for outbuildings at ATB has impacted financing options.

What exactly is a residential outbuilding?

A residential outbuilding is a detached structure that is part of a residential property. There can be many different types of outbuildings, but when we are talking about mortgage financing, we are referring to an outbuilding that is for personal or recreational use only, not to be used for any business or income-generating purposes. These can look different depending on if you are in a rural or an urban setting.

Rural residential outbuildings

There are many different variations of rural outbuildings because there is often more room available. These buildings can be used for storing vehicles, equipment and other recreational vehicles. They can also provide a space to dabble in hobbies or as a gathering place for neighbours, friends and family (sometimes all of the above). There is also the "shouse” or “shop house" which is simply put, one large building that's part-shop and part-house.

Urban residential outbuildings

For urban homes, we often think of a single-family home with an attached garage and a yard. That's not always the case, especially in recent years. Many people want a second garage to store their vehicles or ‘toys’ or to have a place to get-away (sometimes referred to as a "man-cave" or ”she-shed").

Multi-generational outbuildings

In recent years, many families are exploring options for both rural and urban multi-generational household needs with residential outbuildings. These outbuildings allow for families to keep their loved ones close by, but also have their own space, and can be a more affordable option in many situations.  

Urban outbuildings can include carriage or laneway homes. These are typically a smaller home (often a loft above a garage) located on the property. For rural settings, these are often referred to as in-law or family suites and allow for independent living opportunities on one property.

What are my options for financing a residential outbuilding?

Historically, there was never a policy to support valuing a residential outbuilding for financing and as such, could not be included as part of a residential mortgage. They primarily had to be financed either with cash, or various forms of potentially high-interest personal credit.

In 2020, ATB developed and launched new guidelines which provide the opportunity to include outbuildings in the overall valuation and mortgage of the property. In short, homeowners may be able to unlock equity and access financing in the most affordable way possible to enhance their property and not have the burden of paying for the entire project out of pocket or having to forgo it altogether. 

For example, if a homeowner would like to build a new structure on their property, they should talk to their banker about their plans. It’s important to note here that certain types of mortgages are required to be able to access these funds, therefore an initial conversation with a banker will help clarify funding options available. 

They will also need to learn more about the permit requirements within their local municipality or county. At that point, the homeowner can potentially refinance their mortgage to include the valuation of the outbuilding to secure the financing to get started on the project.

What are the steps to building a new outbuilding or upgrading an existing one?

There are five simple steps to remember:

1. Research the permit requirements in your county or municipality to understand what kind of documentation and requirements are needed for approval. Most requirements are available online through your county or municipality website.
2. Reach out to your financial institution to determine what you can secure for financing before you start the project.
3. Decide on how you will construct your building and what kind of resources you will need to make it happen, such as contractors, planners, tradespeople, etc.
4. Secure quotes to determine the overall cost to build your outbuilding.
5. Circle back with your banker or branch to finalize your financing needs.
    

If you are thinking about building or updating an outbuilding on your property, we’re here to help! We’ve got you covered if you want to learn more about accessing the value of your residential outbuilding, contact one of our mortgage specialists or reach out to your local branch to get started.