You have multiple investment properties and you want to try to get it to just a single monthly payment rather than individual monthly payments, but you have no idea what kind of loan or payment that would even be called.
This type of mortgage is called a blanket mortgage or also known as a blanket loan.
More specifically, a blanket loan, or blanket mortgage, is a type of loan that is used to fund the purchase of more than one piece of real property.
The amount of properties in one loan can be between 2 and 50. These loans are usually popular with builders and developers that buy large tracts of land and then subdivide them to create individual parcels to be sold one at a time.
Instead of having a new mortgage every time a portion of the development is sold, the borrower would use the blanket loan to buy all of them. Once a part is sold, that portion of the mortgage is released, while leaving the rest of it intact.
With more traditional mortgages, there is a “due-on-sale clause” that usually means that once a property that is under the mortgage is sold, the entirety of the outstanding mortgage debt must be paid in full immediately.
With a blanket mortgage, this creates a “release clause” that allows the sale of the individual portions and the corresponding partial repayment of the loan.
This is typically done to facilitate purchases and sales of multiple units of property with the convenience of a single mortgage.
Who do Blanket Loans Work For?
Blanket loans can work for a multitude of different people. It can be a great alternative that can be used to finance the purchase of multiple properties—especially for developers, real estate investors, and flippers.
Blanket mortgages are usually taken out to cover the costs of purchasing and developing the land that borrowers plan to divide into individual lots.
In most cases, a borrower acquires the properties in a large purchase with the intent to sell as individual parts.
Flippers would seek out these mortgages to act quickly and take advantage of opportunities they see in the market. If you, as the investor, identified multiple properties that you’d want to acquire, refurbish, and then resell, a blanket mortgage could offer much more leeway to help make that possible. The clauses of this mortgage allows the ability to resell the properties as new buyers come forward individually.
There is the potential of having terms on the blanket mortgage that make it necessary to refinance the loan when separate properties are sold. This depends on the terms on the loan you receive.
Businesses that have multiple locations could benefit from blanket mortgages as well. This can include real estate developers that invest in commercial or residential property (apartment buildings or multifamily homes).
An Investor who has many properties may want to consider the use of a Blanket Loan to cover all of their properties into one mortgage making it easier to send one large monthly mortgage payment and not 10 or 20 separate payments to different lenders.
To learn more about this type of Investor Loan and see if it may be right for you — please contact us.
