Pros and Cons. What Are The Drawbacks of Prefab Homes

Posted Monday, June 30th, 2025 | 115 views

Prefab homes are an appealing solution for potential homeowners who are looking for a quick and affordable road to home ownership, but they come with a number of challenges compared to conventional new construction homes that are worth investigating.

Before you commit, read our breakdown of the essential pros, cons, and hidden pitfalls of prefab homes.

Are There Drawbacks to Prefab Homes?

Prefab homes do come with certain drawbacks that should be weighed carefully. Some potential drawbacks include limited electricity and water access, limited personalization, logistic and assembly challenges, mortgage and financing limitations, regulatory hurdles and durability problems. 

Limited Electricity and Water Access

Another common drawback of prefabs is related to electricity and water access. Because prefab homes are often situated in locations chosen primarily for affordability or convenience (they’re not being built in wealthy regions where the land costs a premium), there are usually a number of hidden costs or challenges to connecting essential utilities.

You’ll need to arrange extending electrical lines, accessing reliable hydro, and establishing plumbing and water systems – all quite costly and subject to additional municipal regulations or restrictions. This issue alone is one of the reasons people decide to purchase new construction homes instead of prefabs, especially if the rural or undeveloped which increases your total project cost and delays your home’s readiness

Here’s a clear breakdown of the utility-related drawbacks for prefab homes:

• Costly extension of electrical lines to remote or rural sites.
• Difficulty connecting to municipal water supplies in undeveloped areas.
• Potential need for installing private wells or septic systems.
• Additional permits required for utility connections, increasing complexity.
• Limited local infrastructure affecting reliability of electricity and water services.
• Increased construction delays due to utility hookups and inspections.
• Higher installation expenses for plumbing and hydro connections.
• Hidden fees or surcharges from utility providers for distant connections.
• Challenges ensuring consistent water pressure and electrical service quality.

So even though prefab homes offer what appear to be appealing benefits, the potential complexities outweigh these advantages. A traditionally built home provides greater flexibility, reliability, and long-term satisfaction that makes it a wise and reassuring choice for your investment in a comfortable future

Limited Personalization Options

One of the significant joys of owning a home is making it uniquely yours. However, prefab homes are designed with standardized blueprints and although you can choose finishes and colours, you’re typically unable to alter the structure or layout itself. If your dream home includes distinct architectural features or bespoke details, prefab might not fully satisfy your creative vision.

Personalizing prefabs can be quite challenging due to its factory-built nature and standardized design.

Here are some examples of limitations that can restrict prefab personalization:

• The basic floor plan like the number of rooms or their placement is pre-set and difficult to modify without significant cost or redesign (e.g., adding a second story or moving load-bearing walls.)
• Changing the size, shape, or location of windows and doors – the stove or the fridge – is typically not feasible because of limiting options for unique architectural features like large bay windows or custom entrances.
• The roof style (e.g., flat or pitched) and materials are usually fixed which make it hard to add features like dormers or skylights.
• The home is designed for a specific foundation type (e.g., slab or crawl space), which can’t easily be altered to suit a custom site or aesthetic preference like adding a basement, adapting pier foundation, or creating an elevated design with a wraparound porch.
• The exterior finish (e.g., siding type or colour range) is limited to what the manufacturer offers and restricts unique materials like stone cladding.

Logistical Challenges of Delivery and Assembly

Building prefab homes in factories and shipping them in sections to your site can turn into a logistical nightmare. Picture a massive module gets scratched or dented during a rainy haul down a narrow road, or a snowstorm halts delivery for days and leaves your project in limbo.

Then, once on-site, putting the pieces together demands a large crew of experts, perfect timing, and heavy-duty cranes. Even a single misaligned section can cause weeks of expensive fixes or a rushed job that causes leaks years later. 

In contrast, traditionally built homes come with more comprehensive warranties and clearer accountability which gives buyers greater peace of mind that construction issues won’t later become a burden of their own. 

Mortgage and Financing Limitations

Securing a mortgage for a prefab home in Canada, including Ontario, can be more challenging than for traditionally built homes. Some lenders, such as certain credit unions and specialized brokers may support prefab projects, but many banks categorize them as modular or manufactured homes due to their factory-built nature.

This classification can affect the availability and terms of financing. For instance, you might face higher down payment requirements, such as 10-20% compared to the 5% minimum for traditional first-time homebuyers, especially if the home lacks a permanent foundation or sits on leased land. Stricter appraisal processes may also be common because lenders assess the home’s value and resale potential more rigorously. You may just find fewer mortgage options overall.

The range of financing choices can be limited because not all financial institutions are comfortable with prefab homes, particularly those on leased land or without a permanent foundation, which are often seen as riskier investments. This often requires working with specialized lenders or mortgage brokers and in Ontario for example, traditional banks may hesitate, while credit unions or private lenders might offer more tailored solutions.

It’s worth asking yourself if the apparent price benefits of prefab homes actually align with your short and long-term goals, given the extra effort involved in securing financing.

Lower Resale Value

Prefab homes don’t often hold their value as effectively as traditionally built homes. There are a number of misconceptions about quality, longevity, and market appeal that contribute to lower resale prices. The ownership status of the land-leased versus bought-can also significantly affect the resale.

Here’s how:

Leased Land:

If the prefab home is on leased land (e.g., in a manufactured home community or park), its resale value is often lower and less stable. Buyers may hesitate because of ongoing lease costs, the lack of land equity, the potential for lease termination, and rent increases. Lenders also view these properties as riskier, which can limit financing options and further depress the resale value. In Ontario, for instance, homes on leased land might be appraised lower, and some buyers may avoid them altogether, especially in rural or less trendy areas.

Bought Land:

In comparison, a prefab home on owned land typically has a higher resale value and better appreciation potential. The difference matters because land ownership directly impacts perceived permanence and investment potential. For example, a high-quality prefab on bought land in a growing Ontario suburb might see steady value growth, while the same home on leased land in a less popular area could struggle to attract buyers.

With leasing or buying land outright, the promise of prefab savings quickly fades. Once you factor in the cost of purchasing land in a desirable area, or the financing and resale hurdles of leased land, any upfront savings from the prefab build can be wiped out entirely.

Zoning and Regulatory Hurdles

Zoning issues can be a huge headache, and you’ll need to hire a professional to help you. Prefab homes can face restrictive zoning and building regulations from local authorities that may impose stricter guidelines concerning the appearance, dimensions, and placement of a prefab structure.

In some neighbourhoods, prefab homes may be prohibited altogether which limits your choice of locations.

To avoid surprises, you should research the local zoning laws and potential restrictions before deciding on a prefab construction.

Here are some zoning and regulatory hurdles you can encounter with a prefab home:

• Prefab homes can encounter restrictive zoning and building regulations that vary by location.
• Local authorities may enforce strict guidelines on the appearance of prefab structures, such as requiring specific exterior finishes.
• Dimensions of the home might be limited, affecting the size or layout you can choose.
• Placement rules could dictate setbacks from property lines or proximity to neighbors.
• In some neighborhoods, prefab homes might be banned entirely due to aesthetic or historical preservation concerns.
• Permits for prefab construction can involve additional scrutiny compared to traditional builds.
• Certain areas may require proof of compliance with energy efficiency or building codes unique to prefabs.
• Homeowners associations in some communities might impose extra rules or outright rejections.
• Thorough research into local zoning laws and potential restrictions is essential before committing to prefab construction.

Prefab Homes vs. Traditionally Built Homes: A Comparison

Considering a side-by-side comparison can help clarify differences:

Are Ready to Actually Find a Perfect Home?

Our suggestion is to do extensive research on the viability and actual affordability of a prefab home, and to then consider the benefits of buying a traditional one – a home that’s truly ready to live in and without any of the inconvenient the drawbacks.