What is a Blanket Mortgage?
A blanket mortgage is a single loan that covers two or more pieces of real property. Instead of taking out separate mortgages for each property, the investor finances multiple properties under one loan agreement. This simplifies lending and can provide better terms than financing each property individually.
How blanket mortgages work
The lender issues one loan secured by multiple properties. All properties serve as collateral for the entire loan. Monthly payment is single, covering all properties. The key feature is the partial release clause, which allows the borrower to sell one property from the portfolio and release it from the mortgage without triggering payoff of the entire loan.
When investors use blanket mortgages
Portfolio building: Purchasing multiple properties simultaneously (often from another investor liquidating their portfolio).
Development: Financing multiple lots in a subdivision under one loan, releasing lots individually as they sell.
Refinancing: Consolidating multiple individual mortgages into a single blanket loan for simplicity and potentially better terms.
Advantages
Simplified management (one payment, one lender relationship). Potentially lower interest rates and fees versus multiple individual loans. Cross-collateralization may allow higher LTV than individual loans. Ability to buy multiple properties in a single transaction.
Risks
Default risk is amplified — if you default, the lender can foreclose on all properties, not just the underperforming one. Partial release terms may be unfavorable (lender may require 110-125% of the released property's allocated loan balance to be paid). Not all lenders offer blanket mortgages, and finding one with favorable terms requires shopping.