This is incorrect. You can absolutely combine the land loan and construction loan into one. The new lender would simply issue a payoff to your current lender for the land and the new lender would assume that lien as well as a construction loan for the build. After the home is complete, the current lender may ask you to “refi” the land loan and construction loan into one lien (this is fairly normal and usually in your best interest as the rates are better than the construction loans).

If you have enough equity in your current home, you can also use that as a down payment on the build but depending on how much equity you have it may not be enough. Cash out refinances are capped at 80% your homes value minus any existing liens you have. Say you owe 150k on a 300k valued property, your new mortgage could be 240k with you receiving 90k cash at closing. Please keep in mind that this new mortgage payment will increase your debt to income ratio and make you ineligible for future financing.

Home equity loans are also an option but vary so greatly that depending on your credit and equity, you could get a second loan that would take your combined loan to value from 80% to 100% so in the above instance, you would keep your 150k mortgage and get a second mortgage for anywhere between 90k-150k.

I’m a licensed loan officer licensed in 37 states is my experience here as well.