A blanket mortgage is useful for real estate investors with a large real estate portfolio. Also called a blanket loan, the mortgage consolidates several separate loans into a single mortgage. For many experienced investors, having one loan payment makes juggling several mortgage payments and interest rates more straightforward.
However, arranging a blanket mortgage loan is not always the best financing option. For example, loans are harder to secure. And putting individual mortgages under one “blanket” can put all properties in the portfolio at risk.
When does it make financial sense to put separate mortgage loans into a single loan? Are there situations when it is best to keep individual loans separate and not consolidate them into an entire mortgage?
This article explores the pros and cons of using blanket loan refinance to manage multiple properties in a real estate portfolio.
Definition of Blanket Mortgage
Also called a portfolio loan, a blanket mortgage is a single loan covering two or more properties. The simplified process lets you make one monthly payment for the entire loan, meaning managing multiple properties is easier. Additionally, you can buy, hold, or sell properties without triggering a due-on-sale clause.
There are a few nuances of blanket loans not associated with traditional mortgages.
For example, the mortgage has a release clause, allowing you to sell one property without having to pay off the loan. Additionally, the blanket mortgage lender attaches a lien against each property covered by the loan. Therefore, defaulting on a mortgage could result in foreclosure on all properties secured in the loan.
Blanket Mortgage Pros
Knowing the pros and cons of blank mortgages can help you make smart real estate investment choices. Let’s look at four reasons why consolidating several mortgages can make financial sense.
Blanket loans simplify paperwork
An attractive feature of blanket mortgage loans is their…