Can I give a family member property to build on if I still have a mortgage on the land?

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Can I give a family member property to build on if I still have a mortgage on the land?

I have a mortgage on 6 acres of land with 1 dwelling. I want to give my son some
of the land to build on. Is this allowed? Where do I start if it is?

Asked on February 19, 2019 under Real Estate Law, North Carolina

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

No, if there is a mortgage, you cannot transfer part of the land. The mortgage is secured by all of the property, therefore giving part of it away would violate the mortgage since it would reduce the security for the underlying loan. Additionally, since the mortgage would predate the transfer and applies to all the land, title cannot be transferred with eliminating this pre-existing security interest. Bottom line, earlier interests in land must be paid extingushed before transferring it.

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

No, if there is a mortgage, you cannot transfer part of the land. The mortgage is secured by all of the property, therefore giving part of it away would violate the mortgage since it would reduce the security for the underlying loan. Additionally, since the mortgage would predate the transfer and applies to all the land, title cannot be transferred with eliminating this pre-existing security interest. Bottom line, earlier interests in land must be paid extingushed before transferring it.


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