What Is a Blanket Mortgage? A Beginner’s Guide

This article is part of a larger series on Business Financing.

• Who It’s Right For
• How It Works
• Rates, Terms & Qualifications
• Pros & Cons
• How to Get One
• Alternatives
• FAQs
• Bottom Line

A blanket mortgage (or blanket loan) allows a borrower to finance multiple properties under one financial agreement. It streamlines the lending process and saves time and money by cutting down on paperwork and various fees associated with applying for several individual mortgages. Seasoned real estate investors use it to manage both commercial and residential properties in a single payment.

Key Takeaways:

• Blanket mortgages are a more complex transaction than standard mortgages, however can be useful to keep track of multiple properties at once.
• Balloon payments can be a requirement of a blanket mortgage and require higher down payments.
• A blanket mortgage can be considered a higher-risk financing option in the event of default since multiple properties are used to secure one loan.

Who a Blanket Mortgage Is Right For

Blanket mortgages typically aren’t applicable for borrowers financing a single mortgage or for first-time investors, as they likely lack experience and resources. Since it can be a rather complicated transaction, it may be best for those who are:

• Experienced real estate investors: Blanket mortgages are best suited for investors who already have experience with getting investment property financing and have an existing real estate investment portfolio.
• Looking to consolidate an existing portfolio: You can use a blanket mortgage to essentially refinance a real estate portfolio and manage your debt obligations with a singular monthly payment.
• Fix-and-flip investors: For experienced fix-and-flip investors who often need quick access to financing, a blanket mortgage provides opportunities to acquire multiple properties and repair them while being able to manage them under one loan agreement.
• Real estate developers: Developers who have plans to purchase land and construct a variety of buildings can utilize a blanket mortgage to finance the project under a singular agreement and avoid extra paperwork and closing costs on individual units.

How a Blanket Mortgage Works

A blanket mortgage is a financial agreement that finances multiple properties under one loan, with the included assets typically serving as collateral. Individual properties included in the agreement can be sold and refinanced without retiring the entire mortgage (aka the release clause). This can occur without invoking the standard due-on-sale clause in typical mortgages that require full repayment upon property sale.

Utilizing a blanket loan can be advantageous since one loan covers all the property and payment details. However, this simplicity comes at a price—it requires higher down payments and closing costs than standard mortgages. Depending on the agreement, you may be subject to a balloon payment at the end of the loan term, as opposed to monthly principal and interest payments associated with standard mortgages.