Investor · Hendersonville, NC · Member since 2016 · 138 posts · 71 votes
My question is in the subject heading, but here's the hypothetical:
Let's say I buy 5 acres for $500,000 using conventional mortgage financing. There's one house on the property. I decide to live in the house with 1 acre and subdivide the rest into 4 additional 1-acre parcels that I will sell for $50,000 each. Do I have to re-finance them as individual parcels before I can sell them? Or do I re-finance at closing each time a parcel sells? Or do I just keep the original mortgage until it is paid off, or the last parcel sells?
It seems like I would have to get my lender's approval of each sale, since the value of the underlying security would change each time a parcel is sold.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
Your last sentence is correct, the lender will have to release the Mtg on each lot as it is sold. They'll want a pay down on the loan of maybe 50% of the proceeds with each sale, you'd have to work that out with them. Also, the local authority would likely require some agreement from the lender before doing the subdivision.