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Mortgage When Lot Split

Discussion in 'Mortgages & Financing' started by talerco, Nov 27, 2021.

  1. talerco

    talerco Law Topic Starter Member

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    Jurisdiction:
    California
    Own home in California. With mortgage - deed of trust.
    What happens to the mortgage if we split the lot into 2 lots?
    What happens if we keep both resulting lots? OR sell one?
    Thanks!
     
  2. welkin

    welkin Active Member

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    You obviously would have to go through a subdivision in your local jurisdiction and notify your lender that the application was filed. You would have to ask your lender what there policy is.

    I would doubt that your lender would allow the subdivision without satisfying the lien first and then if the subdivision was approved, would want the mortgage on each lot reapplied for based on the current evaluation of each lot and your ability to pay.
     
  3. flyingron

    flyingron Well-Known Member

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    I can guarantee that your lender would be upset. I suspect your mortgage contract has a prohibition on such without lender permission and even if it didn't it most likely has a due on sale clause that will be triggered with the deeding necessary to divide the property.

    Notwithstanding all that, dividing the lost doesn't change the security interest which would apply to all the divided properties. It wouldn't be much different than deeding the whole property away. The person getting it would still. have a property encumbered by the.previous mortgage.

    If the mortgage doesn't get paid, the bank will foreclose on the entire property. No sane person would take ownership of a property like that (and certainly no other bank would finance a property still subject to such a security interest).

    And as Welke points out, "splitting" a lot may not be a trivial task based on local zoning and other ordinances. I had an amusing "I told you so" incident with our developer. He decided that it would be more desirable to merge two lots together (figured a larger lot would sell better). I told him that was a stupid thing to do. If someone wanted a big lot they could buy both and put them together themselves, but if he did it, he'd lose the possibility of splitting them out and selling them separately. Sure enough, when the big lot didn't sell, he tried to split them again and the county refused saying that it didn't meet the requirements for subdivision.
     
    Last edited: Nov 27, 2021
  4. zddoodah

    zddoodah Well-Known Member

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    Nothing (with one possible exception noted below). It will continue to encumber the property described in the mortgage/DOT.

    I assume thousands of things will happen. Not really sure what this question means.

    They you'll own one and someone else will own the other.

    It's possible (depending on the terms of the mortgage/DOT and underlying loan documents) that what you've described will trigger a default event that gives the mortgagor/lender the right to foreclose.

    P.S. All this assume that this is a standard residential lot and not the sort of property that a lender might expect to be subdivided.
     
  5. Zigner

    Zigner Well-Known Member

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    Why do you want to split the lots?
     

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