Hi,
I'm a first time poster, long time cyber stalker of this site – it's so useful and interesting.
I don't know if this is a silly question but just wondering how the mortgage works if you sub-divide a property. Say you buy a property on a large block and have a $500,000 mortgage. If you then sub-divide, sell the vacant block but keep the block with the house the mortgage must change as the property may now only be worth $400,000 as it's half the land? I assume that as part of the sub-division you must re-finance? At what point does this occur and how do they value the two new blocks?
This is just one scenario we're considering to free up cash to then renovate the house but trying to consider how much we'd actually get and how much would have to go towards the mortgage.
Thanks!
Generally it will be at the point where you register the new titles – that is because as the title details are to change, you need to seek the mortgagee's consent in order to register a new title and to provide finance over those two new titles (assuming one is to be extinguished) or at the time that mortgagee's interest in the land is to be changed.
The value of each property will be assessed in accordance to valuation principles – by direct comparison using comparable sales data from the area.
Thanks very much for this advice. That makes sense!
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