A blanket mortgage is a single mortgage that covers multiple different properties. The group of assets serves as collateral for the loan. Many real estate developers and large investors often purchase more than one property at a time and a blanket mortgage allows them to do so with a much more simplified transaction of just taking out one loan as opposed to several different loans on each property they are purchasing.
A blanket mortgage also allows a borrower to sell one property from a group of properties and retain the loan on the rest of the properties without having to pay them off to close out the blanket loan. Blanket mortgages offer applications in both commercial and residential transactions including multi-family housing or apartment buildings and are also used by companies or developers who buy and flip homes.
Many blanket mortgages are often used in commercial transactions but can also be utilized by residential landlords to finance a portfolio of rental properties. A blanket mortgage is also called a blanket loan and can be refinanced in the same way as any other mortgage.
Who should get a blanket mortgage?
Blanket mortgages have been designed with companies and investors or landlords in mind that are looking to have a large portfolio of properties that are either commercial or residential. This type of loan is not the best mortgage product for say a brand new landlord that is looking to just start out in the rental property business. A blanket mortgage is also not intended for borrowers on their primary home or a vacation home.
The pros and cons of blanket mortgages
All mortgages have their perks and their drawbacks and a blanket mortgage is no exception to this rule.
A few of the pros associated with a blanket mortgage include that you will pay one closing cost as opposed to many for several properties that are being purchased with just the one loan. This can add up to a very significant savings if you add all of the separate closing costs that you would have paid by taking out a separate loan for each property.
“A con to using a blanket mortgage for several properties is that they require a much higher down payment some require as much as 25 to even 50% down payment which can be a roadblock for some property investors.” – Chuck Gonzalez, Wheat Ridge Realtor®
An attribute of a blanket mortgage that can be both a drawback and a perk is a balloon payment. This can allow the borrower to make lower payments for a period of time but it will be followed by a large lump sum that is due all at once. At times a blanket mortgage can be structured so that the borrower is initially only paying interest working out to a very low total payment but it will mean that a large sum will be expected later. This structure is usually only offered to borrowers with excellent credit and considerable wealth and assets.
If you are looking for loan options in Mission Viejo and California that will allow you to invest in either commercial or residential properties please contact me anytime.
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