Mortgage Partial Release to Divide Land


I have a mortgage on a property which includes 2 acres of land. Can I sell off a piece of the land? How does that affect the mortgage?


From the look of it, you bought an oversized parcel of land and that there’s enough land for you to cut off a piece of it and sell it to someone else. I’m guessing that the mortgage is probably recorded against the entire parcel. If that is the case, you will probably need to enlist the help of an attorney in order to file the papers necessary to turn your one parcel into two parcels. Once that happens, someone will need to get in touch with your current lender to ask about a “ partial release.” This document will release the mortgage as to the piece of land that you are separating from the piece that has your house on it.

However, in exchange for the release, the lender will probably ask to get paid out of the money you receive from the sale. You see, when you bought the property, you gave the lender a mortgage on a property that was made up of a house and a certain number of acres. By selling off a piece of the land, you are reducing the value of the lender’s collateral. As a result, they will want you to apply part of the proceeds of the sale so as to reduce your loan balance in proportion to the amount by which the value of their collateral is reduced.

There’s alot of work involved in doing what you want to do. I strongly urge you to seek the assistance of an attorney. The hassle and red tape you save yourself will be well worth the expense.

Answered almost 9 years ago
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