Buying 2 properties, one loan. How to separate later?

[Jen O.]

If I buy a house and a lot next to the house using one loan, how do I separate it later?  Do I have to refinance? It sounds like a headache, so I'm trying to decide if we should consider 2 loans instead of causing ourselves a big headache later.

Is there a post here that I can find out more about this?

Thank you so much!

[Joshua Fulenwider]

@Jen O. I'm a commercial lender and we do this sort of financing a lot.  One of the ways we have gone about is to determine the proportional value of each  property to the collateral value of the loan up front.  Then as time progresses we can release one property by determining the proportional value that needs to be paid to us to release it.  You can refinance just the one lot by itself to pay us off or sell it.

Another option we have done is to re-appraise the part we are keeping and compare that to the remaining loan balance.  If we have adequate security we can just release it  Otherwise we  may need pay down still for the release.

If you are going with conventional financing I would recommend two loans.  Mortgages have funny rules.