Maybe you have a piece of land that has a mortgage on it, but you only want to sell a small portion, or you need some money now, or you just don’t need that much land. People often ask this.
So, can you sell part of your land in spite of a mortgage? Yes, but it is not so simple. It is not as simple as finding a buyer and signing on the dotted line. You will also have to get approval from your lender, as well as follow certain steps to finish.
In the next sections, you will learn what is needed to get this done, how to get a construction loan for your project, and what the approval process will be.
Can I Sell Part of My Land If I Have a Mortgage?
Selling part of your mortgaged land is possible, but it requires careful planning and approval. Your lender holds a claim on your entire property until the mortgage is paid off. This means you can’t just sell a piece without their permission.
Yes, But You Need Your Lender’s Approval
You can sell part of your land if you have a mortgage, but your bank must approve the sale first. Without this approval, the sale cannot legally happen. Your lender needs to agree to release their claim on the specific portion you want to sell.
This process involves something called a partial release of the mortgage. It’s a legal document that removes the lender’s claim from the part you’re selling. Most mortgages also include a due-on-sale clause that can complicate things.
Getting approval isn’t automatic. Your lender will review your request, check your payment history, and decide if they’ll allow it. Starting this conversation with your bank early is important for your success.
The Due-On-Sale Clause: Why You Can’t Just Sell
Most mortgages include a due-on-sale clause, also called an acceleration clause. This clause gives your lender the right to demand full payment of your entire loan if you sell any part of the property. It’s designed to protect the lender’s financial interest.
This clause exists because lenders want to make sure they can get their money back. If you sell part of your land, the remaining property might not be worth enough to cover the loan. Banks use this clause to prevent risky situations.
If you try to sell without approval, you could face serious problems. Your lender might demand immediate payment of the full loan amount. That’s why getting proper permission is so important before you move forward.
What Is a Partial Release of Mortgage?
A partial release of mortgage is a legal agreement that removes the lender’s claim from a specific portion of your property. It allows you to sell that piece while keeping the mortgage on the remaining land. This document protects both you and your lender.
Both parties benefit from this arrangement when done correctly. You get to sell part of your land and keep the rest. Your lender maintains security on the remaining property and may collect a release fee.
Lenders typically consider these requests after you’ve made payments for at least one year. They want to see that you’re reliable and that the remaining land still provides enough security. Your payment history and the property’s value both matter in their decision.
Process and Requirements
Getting approval to sell part of your mortgaged land involves several important steps. You’ll need to work with local officials, hire professionals, and follow specific legal requirements.
Understanding Subdivision Requirements
When you want to sell part of your land, you often need to subdivide it first. Subdivision means legally splitting your property into separate lots. Each new lot must meet local requirements to be sold on its own.
Not every sale requires formal subdivision. If your buyer plans to use the land in a certain way, different rules might apply. However, most residential land sales do need this process completed before closing.
The subdivision process creates separate legal descriptions for each piece. This gives each lot its own identity in county records. Without this step, you can’t transfer ownership of just one portion.
Check Zoning Rules and Regulations
Your local planning or zoning department controls what you can and cannot do with your land. These officials enforce rules about lot sizes, land use, and development. You must follow their requirements before any sale can happen.
Common zoning restrictions include minimum lot sizes, road access requirements, and land use limitations. Some areas only allow agricultural use, while others permit residential building. Each zone has different rules you must follow.
Call your local zoning office before you start the process. They can tell you what’s allowed on your property and what steps you need to take. This saves time and prevents costly mistakes later.
Minimum Lot Size Requirements
Every area has minimum size requirements for new lots. These requirements vary widely by location and zoning type. Some places require only 2,500 square feet, while rural areas might need 5 acres or more.
Your new lots must also meet minimum dimension requirements. Many areas require lots to be a certain width and depth, not just total area. A long, narrow strip might meet the square footage but still violate local rules.
Check these requirements early in your planning. If your proposed split doesn’t meet the minimums, you won’t get approval. Your surveyor can help you plan divisions that follow all local rules.
The 7-Step Process to Sell Part of Your Land with a Mortgage
Here’s a clear roadmap for selling part of your mortgaged land, from start to finish.
Step 1: Ask Your Bank for Partial Release Eligibility
Start by contacting your mortgage lender to discuss a partial release. Explain how much land you want to sell and why. Ask about their specific requirements and any fees you’ll need to pay.
Your lender will review your mortgage payment history and current loan balance. They’ll also want to know the value of the land you’re keeping versus what you’re selling. Good payment history improves your chances of approval.
Be prepared to provide details about the proposed sale. This includes the size of the parcel, its estimated value, and your plans for the remaining land. The more information you provide upfront, the faster the process goes.
Step 2: Contact Local Planning/Zoning Department
Reach out to your local planning or zoning office to learn the requirements in your area. Ask about minimum lot sizes, subdivision procedures, and any restrictions on your property. Get this information in writing if possible.
They’ll tell you what applications you need to file and what fees you’ll pay. Some areas have simple processes, while others require multiple steps and hearings. Knowing this upfront helps you plan your timeline and budget.
Ask about any special requirements for your specific property. Wetlands, steep slopes, or other features might add extra steps. Understanding these issues early prevents surprises during the approval process.
Step 3: Hire a Surveyor to Create a Plat Map
A licensed surveyor will measure your property and create a plat map showing the proposed division. This map includes exact measurements, boundaries, and legal descriptions for each new lot. You’ll need this document for all official applications.
The surveyor will mark corners and boundaries with physical markers. They’ll also check for easements, right-of-ways, and other legal issues that might affect your sale. This professional survey protects you from future disputes.
Plan to spend several hundred to a few thousand dollars on this service. The cost depends on your property’s size, location, and complexity. This is a required expense you cannot skip.
Step 4: Submit Subdivision Application
File your subdivision application with the local planning department. Include your plat map, application fees, and any other required documents. This officially starts the review process for your proposed split.
The review process can take several months to over a year. Officials will check that your plan meets all local rules and regulations. They may require changes to your proposal before approving.
Stay in touch with the planning office during this time. Respond quickly to any questions or requests for additional information. Delays in your responses will slow down the entire process.
Step 5: Obtain Title to New Lots
Once your subdivision is approved, you’ll receive the official title to the separate lots. This means each piece now has its own legal description in county records. You can now legally sell one lot while keeping the other.
Your title company or attorney will help prepare the new legal descriptions. These must be accurate and match the approved plat map exactly. Any errors here can cause serious problems at closing.
Make sure your lender signs off on the partial release before you proceed. This document must be recorded at the county office. Without it, your buyer won’t get a clear title to their new lot.
Step 6: Enter Into the Sale Contract
Create a purchase agreement with your buyer for the specific lot you’re selling. This contract should include the exact legal description, sale price, and closing date. Both parties sign this agreement to make it official.
A vacant land purchase agreement is different from a home sale contract. It should address issues like access, utilities, and any restrictions on the property. Consider having an attorney review the contract before signing.
Make sure the buyer understands exactly what they’re getting. Share the plat map, zoning information, and any restrictions that apply. Clear communication now prevents disputes later.
Step 7: Schedule Closing and Transfer Deed
Set up a closing date with a title company or attorney. At closing, you’ll sign the deed transferring ownership of the lot to your buyer. The buyer will pay you the agreed price, minus any fees.
The deed must be notarized and then recorded at your county recorder’s office. This makes the transfer official and a public record. Your partial release from the lender should also be recorded at this time.
After closing, the buyer owns their lot free and clear. You still own the remaining land, with the mortgage now only attached to that portion. Keep copies of all documents for your records.
Conclusion
So, can I sell part of my land if I have a mortgage? The answer is yes, but there are certain steps you need to take and permissions you need. The key is that you work with your lender, and they agree to accept a partial.
The process is long and usually involves your bank, local authorities, and professional surveyors, but every step is necessary to complete a legal and successful sale. If you skip any step, it will only cause headaches down the road.
You have access to attorneys and surveyors whose jobs are to protect your interests and ensure that documents are completed correctly and requirements are met. If it seems too complicated, you can always phone for professional help.
Frequently Asked Questions
How long does it take to get approval to sell part of my mortgaged land?
The approval process typically takes several months to over a year. Your lender’s review might take a few weeks, but local subdivision approval is the longest step. Complex properties or strict local rules can extend this timeline even further.
Will my lender charge a fee for a partial mortgage release?
Yes, most lenders charge a fee for processing a partial release of the mortgage. This fee often ranges from a few hundred dollars to a percentage of your loan balance or sale amount. Contact your lender early to learn their specific fee structure.
Can I sell part of my land without subdividing it?
In most cases, no. Formal subdivision is usually required to sell part of your land with a mortgage. Local laws require separate legal descriptions for each parcel. Check with your local planning department about specific requirements in your area.
What happens if I sell without my lender’s permission?
Selling without lender approval can trigger the due-on-sale clause in your mortgage. This means your lender can demand immediate payment of your entire loan balance. This situation can lead to foreclosure if you cannot pay the full amount.
Does the remaining land need to be worth more than my loan?
Yes, most lenders require the remaining property value to exceed your outstanding loan balance. This protects the lender’s security interest in case of default. The exact ratio varies by lender, but more equity improves your approval chances.
