Construction loan, help

[Bryan Rodas]

I am trying to understand construction loan, my sister has a house with a big lot. She wants to build another house, and rent it. However, she has a mortgage on the whole house. I was wondering if is there a way where we can have a lien release on the lot, or if she builds the house on lot with a mortgage, it is not going to affect anything since she is not selling the house. Can somebody please help me finding a way to do it? Thank you

[Stephanie P.]

@Bryan Rodas

Your local zoning office would be your first stop.  Ask them if building a house on the lot is permissible.  You should see if the lot can be subdivided to it can be a separate entity from the original plat. The mortgage is a second hurdle, but it the lot can't be peeled off from the original parcel, you'll be putting an additional structure on the same parcel which could affect its marketability.  If she has a mortgage on the original parcel, she may not be able to subdivide it without paying off that mortgage because that's part of the original valuation.

Lots of if's.  Best of luck

Stephanie