Blanket Mortgage: What It Is And When It's Used

When you’re getting a mortgage loan on one property, there’s a process involved, but it’s a fairly contained financial transaction. On the other hand, if you’re a developer or real estate investor who’s managing finances across multiple properties and trying to make sure you have the ability to maintain and even expand your portfolio, things can get complicated.

A blanket mortgage affords the opportunity to combine several mortgage loans into one. This enables the client to save time by not having to manage all of their property separately. There’s also the possibility that you could save some money in this consolidation.

What Is A Blanket Mortgage, Or Blanket Loan?

A blanket mortgage, or a blanket loan, is used to buy multiple pieces of real estate property at a time. Builders and developers who use blanket mortgages can divide their property into portions to be individually sold.

As with a traditional mortgage, a blanket mortgage is secured by the properties being purchased or refinanced, which serve as collateral. However, there is a unique release clause in blanket mortgages. This allows the client to sell a property and be released from liability for that portion of the mortgage while the rest of the mortgage remains in force. This enables a client to sell the property without having to repay in full or refinance the loan each time a property is sold.

Who Would Use A Blanket Mortgage Loan?

Blanket mortgage loans aren’t intended for people who own a primary home as well as a single second home or investment property. Rather, it’s for people or entities who have a portfolio of properties. Among them, blanket mortgages could be a good option for the following groups:

• Real Estate Investors: If you have a portfolio of investment properties, a blanket mortgage could be an option to help you consolidate your finances while freeing up cash through equity over time to buy more properties.
• House Flippers: If you’re flipping houses, a blanket mortgage can enable you to acquire and refurbish multiple properties at the same time in order to sell them when they’re fixed up.
• Builders And Developers: Someone building houses is the perfect candidate for a blanket mortgage because you’re buying a lot of property and developing it all at once.
• Business Development: You need a lot of money in order to open multiple locations. A blanket mortgage could make doing this easier because it’s a single financing instrument.

Where Can I Find Blanket Mortgage Lenders?

Blanket mortgages are typically offered by commercial lenders who operate outside of the traditional banking and mortgage origination system. They cater to experienced real estate and commercial investing professionals who are used to dealing with these types of transactions. It’s important to find the right lender for you.

Rocket Mortgage^® doesn’t offer blanket mortgages at this time.

Bottom Line

A blanket mortgage allows you to buy or refinance several homes under one loan so that each property can receive the same financing terms. Rather than pay off the whole thing at once, you can be released from liability for individual properties as they are sold or refinanced under different terms. This may make it easier to manage than financing for multiple properties, and you can save some money by saving on closing costs and certain other fees. However, it’s important to note that these loans often come with higher rates and down payments. In addition, properties still need to be appraised individually, which will lead to those fees, among others. Typically, blanket mortgages are offered by lenders who focus on commercial loans.

We hope this has given you a better understanding blanket mortgages and the way they work. Check out even more real estate information on the Learning Center.