Blanket Mortgage: How It Works & Who Should Consider It

A blanket mortgage is a single loan, which applies to multiple properties. If you take out a blanket mortgage, your mortgage can cover several pieces of real estate. Your assets act as collateral for the mortgage. 

Blanket mortgages are often beneficial for investors, individuals, or businesses that own several properties or apartment or office blocks. Rather than taking out a mortgage for each house or apartment, applicants can cover multiple investments to expand a portfolio with a single blanket loan. 

What Are the Terms of a Blanket Mortgage?

Real estate developers and investors often look to buy multiple properties at the same time. If this is the case, the individual can consider a blanket mortgage to cover all the houses, apartments, or commercial premises they plan to buy. 

When you take out this type of loan, the terms of a blanket mortgage mean that you can sell properties individually while retaining your mortgage. The unique release clause in blanket mortgages means that if you want to sell one property, you don’t automatically have to sell any others covered by the blanket mortgage. 

As with other types of mortgage, the properties covered by blanket loans act as collateral. 

Who Should Consider Blanket Loans?

Blanket mortgage loans are generally recommended for the following people and entities:

• Companies that buy multiple properties, for example, apartment blocks or commercial units
• Experienced property investors looking to add more than one property to their portfolio
• Commercial and residential landlords 
• Developers and investors looking to flip properties

On the other hand, blanket loans are not intended for beginner investors or homeowners who have a primary home and a second property for vacations. They are designed to benefit experienced investors, developers, businesses, and individuals with more extensive property portfolios. 

Advantages of Blanket Mortgages

As with most types of loans, there are pros and cons to consider. Here are some of the key benefits of taking out a blanket mortgage: 

• Saving money on a mortgage application and processing fees: When you take out a blanket mortgage, you can save money on a mortgage application and processing fees because you will only be taking out one loan, rather than a mortgage for every property. This will save you time, too.
• Preferential rates: In some cases, an aggregate blanket mortgage offers access to preferential interest rates compared to traditional mortgages that cover single properties. Applicants may be able to negotiate better terms with a lender than they would if they were negotiating with different lenders for mortgages for each property. The better the rate, the more money you could save over the term of the mortgage. 
• Increased capital: If you manage to negotiate a lower interest rate, this will free up capital to spend on developing, renovating, or buying properties. 

Downsides of Blanket Mortgages

Disadvantages of blanket mortgages include:

• Higher down payment: In many cases, the value of a blanket mortgage will be higher than a conventional home loan, which means that lenders require a more substantial down payment. The applicant will need to ensure that they have the funds available for the down payment to secure a blanket mortgage. 
• Terms: The terms of blanket loans may be different from traditional mortgages. For example, in some cases, a borrower may need to make a balloon payment, which ensures they can cover the entire loan amount during a specific term. 
• Risks: Your properties will serve as collateral when you take out your loan. If you default, there may be a situation where more than one property is affected. A lender may seek to seize control of multiple properties covered by the mortgage. 

How To Find a Blanket Mortgage

If you’re considering taking out a blanket mortgage, it’s beneficial to carry out research and to spend time comparing loans and finding the best mortgage provider. It’s essential to gain an understanding of blanket mortgages and to ensure that you’re familiar with the terms and what they mean for you.

You should be fully aware of the fees for your blanket mortgage, the duration of the agreement, and the amount of money you’ll repay. 

If you are confident that a blanket mortgage is the right choice for you, research online to find reputable providers, seek expert advice, and compare offers. Read reviews and testimonials, check that you are applying for a loan from a reputable and approved lender, get knowledgeable about the mortgage terms and conditions before submitting your application.

Don’t hesitate to ask questions or ask for more information if you have queries or you’re unsure which loan is best for you.