Dave, welcome back! I came here several weeks ago for a question and was very disappointed to find you were "not around". As you can see you were missed by many. So glad your back. I still have that question so if you can be of help to explain this I'd appreciate it.

In 2003 we purchased 11 acres of bare land for $80,000. We put 50% down and took a Land Loan (Bank A) for the remaining balance.

In 2004 we refinanced the land to pull out equity to use towards building the house. We had a good amount of savings towards the home but needed some additional money and wanted to avoid a mortgage as we were going to general contract the house ourselves. The closing cost of a construction loan was estimated at $5000 whereas Bank B offered to refinance our land loan with no closing costs under a bank promotion they were running. The new appraisal came in at $115,000. Some of the increase in value was due to a $15,000 pole building that we had paid cash for. We refinanced with Bank B for $75,000 on a fixed 15 year loan. The bank listed it as a "home equity loan" though there was no home on the property.

We will soon be receiving our Certificate of Occupancy and would like to then refinance to get some additional money to complete some unfinished items. With the refinance we will still have more than 75% equity. Our income is stable but not increasing so we would like to stay with a fixed rate loan (no HELOC or adjustable rate).

I have talked to more than one bank and they have each said that we must get a mortgage. They say we can not refinance our home equity loan or get a second home equity loan. They can not explain why except to say that legally they can only do a home mortgage.

So my question is why can't we refinance our home equity loan or get a second home equity loan? Is it illegal?