[rusnak]

This is all one parcel, right? So refi the main house. And besides, it sounds as if you have separate free standing structures. If you have multibple parcels already, then the issue is not zoning if the minimum lot size allows separate single family dwellings. Your issue can be minimum lot setbacks, which can be solved with a variance.

The bigger problem sounds as if the building codes are not met for a dwelling unit. Maybe refi the "storage" instead. This would be like a local bank mini perm collateralized by the lot(s). Maybe you need to find a different bank.