Strategy 51 of 107
Split off and sell extra land, with the lender's partial release
What it is
If the lot is large enough to divide under local zoning, get a survey and a subdivision approval.
Steps
- If the lot is large enough to divide under local zoning, get a survey and a subdivision approval.
- Ask the servicer for a partial release of the land being sold; the lender will usually require the proceeds to go to principal.
- Sell the parcel, pay principal, then ask for a recast.
Repeat: Once.
Measure: Net sale proceeds (enter as a one-time amount).
Try it in the calculator Enter its amount in "One-time amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Surveys, permits and approval can take months and cost money.
- A new neighbor next door.
- The lender can refuse the release; capital gains tax may apply.
Who it fits
Grandmas and grandpas (62 and over), Married couples, Higher net worth, with assets, Business owners
Needs
Owns acreage or a large lot
How predictable
Depends on markets or variable rates
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (grandmas and grandpas (62 and over)). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: if the lot is large enough to divide under local zoning, get a survey and a subdivision approval.
Suppose it brings a one-time $30,000 on principal. The loan would be paid off in 22 years 10 months instead of 30 years, saving about $134,798 in interest. To finish in five years, they would still need about $3,387 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sequences that use it
- Sell what you don't use: Turn idle things into principal, end their carrying costs, then recast to lower the payment.
- Five-year sprint: landowner: Land can pay three ways: a lease each year, a one-time bonus or easement payment, and the sale of a lot you do not need.
Sources and more information
- Fannie Mae Servicing Guide: Release or partial release of property securing a mortgage servicing-guide.fanniemae.com
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
Related strategies
- 58. Sell what sits unused: gold jewelry, collectibles, a boat or a second vehicle
- 43. 65 and over: sell a policy you no longer need instead of surrendering it
- 59. Sell a timeshare or vacation property that costs more than it gives
- 41. Inherited assets: sell after the basis steps up, pay principal
- 67. Move idle savings above the emergency fund to principal
- 32. Find money already owed to you: unclaimed property and old savings bonds