Building a second home on my primary home's lot, will it affect my mortgage?

Question

Hello BP friends,

I purchased my primary residence a couple years ago and it is on a double lot. I looked into splitting the lot with my lender, but I dont have the right LTV for them to split it outright without paying down my mortgage with a significant sum I don't have handy. Would it negativly affect my mortgage, or do I need to notify my lender at all to build the second home on the lot and then figure out the lot split later if it's necessary for renting or selling the new or original home?

Thanks for any insight!

Justin Albrecht · Answer

Hey Kevin, nice work buying a primary residence on a double lot! Looking for the value add features like the 2nd lot give you options and flexibility in the years to come. I bought my first rental duplex and one very important feature was that it came with a 2nd lot i could build on in the future or sell if i needed more cash during the renovations. I haven't done so yet, but it's a good card to keep up your sleeve for when you are ready.

I like what Wayne said, look up the zoning laws and get in touch with the city to see if you could build without splitting the lots. I believe new construction loans typically require a 20% down payment so you'll likely need more cash on hand than buying a primary residence. I'm not 100% sure on that, but you can call around to lenders to start planning. Best of luck!

Wayne Brooks · Answer

@Kevin Hausfeld   Nothing would prevent you from building another home on it, assuming there are no zoning/building restrictions for 2 homes on one lot, but you couldn’t get a loan for it.