Tuesday, November 13, 2007

query: what happens to a mortgage after property has been subdivided


The preferred query would be - what happens to a mortgage BEFORE property has been subdivided. Well, maybe all is not lost is the sub-divided property hasn't yet been sold. The big issue is to deal with the mortgage BEFORE portions of the property is sold.

First, realize that the mortgage has priority over the subdivision. That's not a big deal because it's unlikely that the mortgage lender will care that you have divided up their collateral into smaller pieces on paper. They WILL care if you start selling those pieces. So what do you do?

Before you transfer or sell a portion of the collateral securing a mortgage, contact the mortgage lender and request a RELEASE. The mortgage lender will likely re-appraise the property. They may or may not require that you pay a portion of the mortgage balance in exchange for the RELEASE. In any case, your attorney or the title agent handling the sale of the property will take care of having the release recorded.

If you have already subdivided and sold a portion of the property, contact the lender now and you can still have that release processed.

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