Blanket Mortgage
Definition and meaning of Blanket Mortgage in real estate.
A blanket mortgage is a single commercial or residential home loan used to finance the purchase of two or more separate parcels of real estate simultaneously.
In more detail
This financing method is popular among real estate developers, builders, and large-scale investors who want to consolidate their property acquisitions under one loan. The defining feature of a blanket mortgage is the release clause, which allows the borrower to sell off individual properties from the mortgage without paying off the entire loan balance.
This provides the flexibility to develop subdivisions, sell individual lots, and keep the remaining properties under the original loan. It also reduces transaction costs by avoiding the fees associated with setting up separate mortgages for each property.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Required by | Developers, home builders, and real estate investors managing portfolios |
| Key feature | A release clause that allows individual properties to be sold and released from the lien |
| Also known as | Blanket loan |
A developer uses a blanket mortgage to purchase land subdivided into multiple individual residential lots, intending to sell the lots one by one over time.
Frequently asked questions
What is a release clause in a blanket mortgage?
A release clause is a provision that allows the borrower to pay a predetermined portion of the loan to free a specific property from the mortgage lien, enabling its sale to a new buyer.
Why do developers use blanket mortgages?
Developers use them to buy large parcels of land or multiple lots under a single loan, simplifying financing and allowing them to sell individual properties without refinancing the entire project.
Can individual home buyers get a blanket mortgage?
Blanket mortgages are generally commercial loans designed for developers and investors, so they are not typically available or necessary for standard individual home buyers.