Follow These Simple Steps to Sell Part of Your Land When You Have a Mortgage
One of the questions that property owners ask is whether it is possible to sell part of a property when they still have a mortgage on the same. While it is quite easy to sell the entire property, provided that the selling price will cover the cost of paying off the mortgage payments remaining, selling part of the property is a little more complicated. You will need consent from the lender to sell part of the property, and of course, there will be terms and conditions you have to meet before you get permission to make the sale.
Cost of the land versus the mortgage amount
The first important consideration to make is the cost of the property that you are trying to sell. If, for instance, you have a $300,000 mortgage on a 10-acre lot, and you want to sell nine of those acres for $200,000 the mortgage lender will not allow you to make the sale because the remaining one acre cannot possibly cover the mortgage. The lenders need to know that if you are unable to pay the mortgage, they still have valuable collateral that they can sell and recover their money.
The subdivision process
If the lender has agreed to the sale of part of your property, you still have to follow the proper channels to subdivide the land. There are the legal steps followed in land subdivision in Australia:
Obtain a copy of the title and plan diagram of the land to be subdivided. You will need to have these two documents to get a qualified surveyor to handle the subdivision.
The licensed surveyor will study the documents and liaise with the council to make sure the plan they come up with meets the local land subdivision requirements.
The council reviews the subdivision plan and decides whether it fulfils the requirements. If it does, a lawyer or conveyancer will be called in to prepare and lodge the documents.
Issuance of new titles
When all the conditions have been met, the land will be subdivided, and the new owner will be informed about it. The lands office will receive the lodged documents and use them to create new titles for the separated pieces of property.
In those three easy steps, you can find out if your property can be subdivided and sold. Note that you can decide to settle part of the mortgage with the proceeds of the sale if the lender agrees with the arrangement.