Legal Question in Real Estate Law in California

Re: real estate

Probably not without the approval of the lender(s). When you borrowed the money, you gave the lender a security in all of the property, including the house and the land. There is most likely a provision that prohibits you from destroying the property or otherwise impairing the lender's security interest. You should have a local real estate review the loan documents, but you probably cannot do what you propose without lender consent.

Re: real estate

Mr. Starrett's answer is "right on" if you are talking about an existing loan or line of credit - demolishing a house that your lender relied upon as part of the collateral would be deemed "waste" (a legal term) and you could be sued personally.

On the other hand, when I first read your question without peeking at the prior answer, I assumed you were asking whether you could get a new loan or line of credit to do what you have in mind - demolish and rebuild.

The answer to that question would be "probably." You are then talking about a different kind of loan; not permanent financing or a regular home equity line of credit, but what would be called a construction loan. When you approach possible lenders, you should call it that, and describe to the lender or loan broker what you have in mind. Whether you will be able to get a suitable loan or not will not then depend upon whether the deal is "legal" so much as whether it makes economic sense to the lender.

More often than not, a construction loan is paid out in instalments as the work progresses. All work will have to be done by licensed contractors and with permits. The amount you can have borrowed at any given time cannot exceed some percentage of your equity at that time. Very good to excellent credit is usually required, and many lenders will insist upon being in first position.