What is a blanket mortgage?

Blanket mortgages are used by real estate developers and other investors who want to buy multiple properties for residential or commercial purposes. The developer usually plans to build on these plots to sell them individually once complete. With a blanket mortgage, you don’t have to make multiple loan applications, just the one will do. 

All the properties together serve as collateral for the loan, but it’s possible to sell them off individually without paying off the loan because of clauses in the mortgage. Sellers may or may not refinance the loan when the properties are sold separately. 

To get a blanket mortgage, apart from the 75%-80% loan-to-value (LTV) ratios, the lenders typically need a down payment between 25% to 60% to serve as proof of at least six months of cash reserves. Lenders will also check your personal employment history, credit score, and proof of income if you’re applying as an individual. Your business revenue and credit is checked if you are applying as a business. Lenders decide your eligibility also based on the number of properties being put under the loan, their location, current condition, and redevelopment and building plans for them. Lenders also estimate the amount of money you’ll potentially make after considering potential vacancy periods and operating costs if you plan to rent out the properties.

Here are some other features of a blanket mortgage: 

• Lenders offer blanket mortgages for LTV not exceeding 75%-80%. The loan value can range from $100,000 to $100,000 million. 
• The loan term may be anywhere in the range of two to 30 years. 
• Amortization periods are commonly 15, 20, or 30 years. 
• You’ll also need to make balloon payments from three, five, 10, or 15 years.
• Interest rates are as low as 4%.
• Lenders also decide your eligibility based on your past record: how much experience do you have building an apartment complex or redeveloping a residential property?

Pros and cons of a blanket mortgage

• You need to make only one mortgage payment for several properties.
• This means you only have to pay origination fees only once and the interest rate remains the same for all the properties put together.
• You can own as many properties as you wish under one loan.
• However, if you default on the loan, you’ll lose your collateral
• Not too many lenders offer a blanket mortgage. It will take you a long time to find one. 
• Monthly loan payments will be high for a blanket mortgage because the amount borrowed will be higher than conventional loans.
• Eligibility criteria are stricter with blanket mortgages.