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Combine Land Loan With Mortgage?
Posted on 1/7/23 at 11:03 am
Posted on 1/7/23 at 11:03 am
I recently bought some land. I’m about to start the home building process and considering if I should combine the mortgage with the land loan. Land loan is just over 100k at 8.75% with 19 years left. Mortgage will be ~500k at 6% for 30 years. I could reduce the land loan by 2.75% but it’ll add 11 years to the loan. What’s the wise play here?
8
Posted on 1/7/23 at 11:33 am to GAFF
quote:
I could reduce the land loan by 2.75% but it’ll add 11 years to the loan. What’s the wise play here?
Obviously this. Just pay it off early.
Posted on 1/7/23 at 11:40 am to GAFF
Too bad you can’t combine a building loan into a land lone 
My land loan is at 3% and I don’t even want to think about what my building loan will be like when I’m ready to pull the trigger
My land loan is at 3% and I don’t even want to think about what my building loan will be like when I’m ready to pull the trigger
Posted on 1/7/23 at 11:42 am to GAFF
quote:
I recently bought some land. I’m about to start the home building process and considering if I should combine the mortgage with the land loan. Land loan is just over 100k at 8.75% with 19 years left. Mortgage will be ~500k at 6% for 30 years. I could reduce the land loan by 2.75% but it’ll add 11 years to the loan. What’s the wise play here?
Have you talked to the bank about this?
Typically you can’t mortgage a house built on land under a separate loan. You could potentially separate a portion of the land to remain under the separate loan, but not sure they’ll let you have two separate loans if you’re building a house on the land. Same as if it was paid off, the property is still under that mortgage/title, it’s value is included in the total calculation.
The first thing my home construction loan did was pay off my land loan.
Posted on 1/7/23 at 12:01 pm to GAFF
You’re going to have to have to pay off the lot loan with the construction/refi mortgage for the mortgage to be in first lien position. So combining is really your only option
Posted on 1/7/23 at 12:19 pm to LSUtigerME
quote:
Have you talked to the bank about this?
Typically you can’t mortgage a house built on land under a separate loan. You could potentially separate a portion of the land to remain under the separate loan, but not sure they’ll let you have two separate loans if you’re building a house on the land. Same as if it was paid off, the property is still under that mortgage/title, it’s value is included in the total calculation.
The first thing my home construction loan did was pay off my land loan.
this. the land gets paid off first. imagine if you were a bank lending money to build a house and the land they were building it on went into foreclosure
Posted on 1/7/23 at 1:05 pm to GAFF
Yeah, your mortgage is gonna be 600k @ 6%
This post was edited on 1/7/23 at 1:06 pm
Posted on 1/7/23 at 1:26 pm to rocksteady
As others have said going to have to combine or payoff land loan in full. Especially if land loan is at a different bank than the construction loan will be. Whoever’s doing the construction will want to be in first lien position.
Posted on 1/7/23 at 3:43 pm to Im4datigers
Sorry, should have mentioned I surveyed out a half acre for my house. So that part will be in my mortgage. Now I’m wondering if I should do all of it.
Posted on 1/7/23 at 4:37 pm to GAFF
I'd also look into if are there homestead implications to having the entire plot. Your primary residence is protected in ways other assets arent. There may be added protections against creditors, judgement, Medicaid eligibility etc if its all part of primary residence.
Posted on 1/7/23 at 4:48 pm to GAFF
Not to be rude, but why would you portion only a half acre for the house and not the whole thing? Assuming we aren't talking about 10+ acres.
Posted on 1/7/23 at 8:42 pm to LSUSUPERSTAR
The land is 27 acres. My original plan was to put the 26 1/2 acres in a conservation to help alleviate some tax burden.
Posted on 1/7/23 at 9:55 pm to GAFF
That makes some sense. Did you calculate the tax savings of the conservation vs refinancing with a lower rate over the 30 yrs?
Adding: maybe use 19 yrs as a basis since that is what you have left on the land.
Adding: maybe use 19 yrs as a basis since that is what you have left on the land.
This post was edited on 1/7/23 at 9:57 pm
Posted on 1/8/23 at 10:09 am to LSUSUPERSTAR
Here’s a way you MIGHT be able to do it.
Go to the current land lender and tell them what you’re doing. Ask them would they be willing to get a new appraisal on the remaining 26 acres to get the value of that alone. Then ask them if that value is sufficient for the land loan LTV, would they be willing to do a partial release of the acre or two that you plan to build your house on.
If they agree to do that, then you have the 26 acres with the land loan and that bank and then you own the 1-2 acres now free and clear. You can then go get a construction loan and mortgage on that 1-2 acres of land.
The only issue might be access to that 26 acres. The bank will want that land to be accessible somehow vs being landlocked. If it’s not accessible from the road after carving out that 1-2 acres then they may not do it. OR you can grant an easement across your 1-2 acres giving access to the 26 acres.
It’s doable but you’re def going to have to get a real estate attorney and the current bank together to work on it together.
Sorry if I got the acreage wrong but I think you get the picture.
Go to the current land lender and tell them what you’re doing. Ask them would they be willing to get a new appraisal on the remaining 26 acres to get the value of that alone. Then ask them if that value is sufficient for the land loan LTV, would they be willing to do a partial release of the acre or two that you plan to build your house on.
If they agree to do that, then you have the 26 acres with the land loan and that bank and then you own the 1-2 acres now free and clear. You can then go get a construction loan and mortgage on that 1-2 acres of land.
The only issue might be access to that 26 acres. The bank will want that land to be accessible somehow vs being landlocked. If it’s not accessible from the road after carving out that 1-2 acres then they may not do it. OR you can grant an easement across your 1-2 acres giving access to the 26 acres.
It’s doable but you’re def going to have to get a real estate attorney and the current bank together to work on it together.
Sorry if I got the acreage wrong but I think you get the picture.
This post was edited on 1/8/23 at 10:28 am
Posted on 1/9/23 at 10:54 am to GAFF
You did the right thing. A conventional loan has a max acre of 25 on the loan. Normally the issue with anything over 10 acres is the comps. Your best bet is to keep it the way you have it now.
Posted on 6/23/23 at 11:27 am to midnightjack
Second time I’ve had an old thread bumped with a posters first post. Bots must be getting worse.
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