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Subdivide mortgaged property
Posted on 1/14/21 at 7:51 pm
Posted on 1/14/21 at 7:51 pm
My house is on 2.5 acres. There is a developer building a small neighborhood around me and he wants to buy about 0.2 acres off of my property to add to his development for another lot. I have a mortgage still. In theory, how would this work? I know mortgage company would have to basically do a partial deed release or something, but what about the proceeds of the sale? Say I get $60k for it. Will I get to keep it or does it get applied to my mortgage balance?
5
Posted on 1/14/21 at 8:25 pm to MaxDraft
How long have you had the mortgage?
Posted on 1/14/21 at 8:28 pm to meansonny
2 yrs in March
Posted on 1/14/21 at 8:30 pm to MaxDraft
You'll need to get permission from your lender first, because mortgages have acceleration clauses that allows them to call the whole thing due at once if you start selling off chunks without them knowing.
If they're OK with it, they can provide you with a payoff amount for a partial release. They may require an appraisal for the chunk you're trying to sell in order to figure out what amount they'd accept to release that chunk from the mortgage.
You'll need to get Parish approval for any subdivisions as well. The developer can probably handle that part, as well as lining up a surveyor.
If your lender won't allow it, maybe you can approach new lenders with your wishes and get a refinance lined up. Rates are great now anyway, so maybe 2 birds with 1 stone for you.
If they're OK with it, they can provide you with a payoff amount for a partial release. They may require an appraisal for the chunk you're trying to sell in order to figure out what amount they'd accept to release that chunk from the mortgage.
You'll need to get Parish approval for any subdivisions as well. The developer can probably handle that part, as well as lining up a surveyor.
If your lender won't allow it, maybe you can approach new lenders with your wishes and get a refinance lined up. Rates are great now anyway, so maybe 2 birds with 1 stone for you.
Posted on 1/14/21 at 8:54 pm to MaxDraft
Your lender is going to require a paydown of the mortgage in order to release that portion of property from the mortgage. It will probably be the full amount you receive for the sale (or close to it). You'd have to ask your lender what they'll charge for the mortgage release price.
Posted on 1/14/21 at 9:33 pm to Neauxla_Tiger
quote:
You'll need to get permission from your lender first, because mortgages have acceleration clauses that allows them to call the whole thing due at once if you start selling off chunks without them knowing.
If they're OK with it, they can provide you with a payoff amount for a partial release. They may require an appraisal for the chunk you're trying to sell in order to figure out what amount they'd accept to release that chunk from the mortgage.
You'll need to get Parish approval for any subdivisions as well. The developer can probably handle that part, as well as lining up a surveyor.
If your lender won't allow it, maybe you can approach new lenders with your wishes and get a refinance lined up. Rates are great now anyway, so maybe 2 birds with 1 stone for you.
^^^^^
This.
A paydown isn't always necessary (if you have had the loan for a while and the property has appreciated and balance shrunk). But if only 2 years in, I'm pretty sure it would be required.
You definitely will need an appraisal.
Most common though is just a new refinance with the appraisal reflecting the new plat. With rates where they are, that may make the most sense.
Posted on 1/14/21 at 9:44 pm to MaxDraft
It’s possible the lender makes you pay a portion of the proceeds to the principle balance. It really comes down to your LTV ratio. The lower the ratio, the less you probably have to put down.
Other option could be to refi as someone else has suggested.
Other option could be to refi as someone else has suggested.
Posted on 1/14/21 at 9:48 pm to meansonny
Thanks. Property value has definitely appreciated. I refi'd March 2020 and value was already $60k higher than original purchase in 2019. I also just finished a permitted bonus room buildout in December of 500 sf with an additional full bath. Conservatively, that's another $50k in value add.
And the price I'll sell the little piece off for is about half the price I originally paid for the whole lot, but it's just a fraction of the property size. I'm confident my LTV will still be in a really good spot.
This is all good and helpful info though. I will call bank tomorrow.
And the price I'll sell the little piece off for is about half the price I originally paid for the whole lot, but it's just a fraction of the property size. I'm confident my LTV will still be in a really good spot.
This is all good and helpful info though. I will call bank tomorrow.
Posted on 1/14/21 at 10:15 pm to MaxDraft
You can't sell anything unless you make a deal with the lender. They have a mortgage on the entire property and you can't pass clear title to any part of it unless they give you a partial release of the mortgage which they don't have to do. Whether they agree or not depends on your relationship with them and how much protection they feel they will have after the property is divided. The more equity you have, the more likely the lender will be to let you keep a good chunk of the money.
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