Subdividing Land with a Mortgage already on property.

[Jeff Klonowski]

I'm in negotiations to purchase a SFR on large plot of land (approx. 2.3 acres). My plan is to purchase the property then demo the house and subdivide the parcel into 3 separate lots. I will invest capital to subdivide with the county, engineer the land and run sewer/water to the lots for resale and potentially keep 1 lot to build a future house.

I'm planning to purchase the SFR with a conventional mortgage, but my mortgage broker and underwriter are telling me this will create a lot of issues both legally and with the bank once I demolish the property and try to subdivide; since the mortgage is for the full property.

My question(s): 

• Has anyone dealt with this scenario in the past? Or can share some insider knowledge? 
• Are there alternative/better financing options for this plan? 

Thanks! 

Jeff