Blanket Mortgage: How to Use it as an Investor

The Big Picture On Blanket Mortgages:

• • A blanket mortgage consolidates loans across multiple properties, helping real estate investors simplify their portfolio management, reduce closing costs, and potentially negotiate better loan terms.
  • By using equity from existing properties as collateral, investors can expand their portfolios without large down payments. This makes blanket mortgages especially useful for buy-and-hold investors, house flippers, developers, and business owners.
  • Although blanket mortgages offer benefits like simpler management and reduced costs, they come with pooled risk and shorter loan terms. A default affects all covered properties, and fewer lenders offer them.

Who says you need a separate loan for every single property?

As you scale your real estate portfolio, it can get tricky to borrow and manage individual loans for every residential property. It also limits your financing options and your ability to pull equity out of existing properties.

Enter: blanket mortgages.

What Is a Blanket Mortgage?

A blanket mortgage is a single loan attached to multiple properties. As terms in real estate investing go, the blanket mortgage definition is pretty simple.

For instance, say you come across a seller looking to sell her entire portfolio of eight properties. You could try to arrange eight separate landlord mortgages — or you could negotiate one single mortgage that covers all eight properties.

Note that the lender attaches a lien against each property. If you default on your mortgage payment, they file for foreclosure on all secured real estate properties.

Lenders usually include a partial release clause with blanket loans to cover the event of the borrower selling one property. Unlike traditional mortgages, you don’t have to repay the entire loan when you sell a property. Typically, the seller repays a proportionate percentage of the loan balance or allows the borrower to put the sale proceeds toward buying a replacement property (which the lender places a new lien against). Think of it like a 1031 exchange for your blanket loan.

Some investors refer to blanket mortgages as portfolio loans, but portfolio loans have another definition: loans held privately on a lender’s portfolio. That’s opposed to being sold off to huge financial institutions like traditional mortgage loans are.

However, as simple as the blanket mortgage definition, its uses and applications get more nuanced.

What Else to Know About Blanket Mortgages

For some real estate investors, blanket mortgages’ flexibility and streamlined nature make them an attractive financing option compared to juggling multiple traditional loans.

How to Use a Blanket Mortgage

Homeowners don’t typically use this type of loan. Most traditional home loans backed by Fannie Mae and Freddie Mac don’t allow cross collateralization for primary residences or second homes.

However, investors who may own dozens of properties need to understand a blanket mortgage and how to use it effectively.

Buy-and-Hold Investors

Landlords who buy and hold real estate can use blanket loans in several ways.

To begin with, landlords can use a blanket mortgage to buy a portfolio of properties all at once, as in the example above. Alternatively, rental investors can use a blanket landlord mortgage to avoid coming up with a down payment.

It works like this: imagine you have an investment property worth $150,000 with an $80,000 mortgage. If you want to buy another property for $150,000, the lender requires a 20% down payment. Rather than come up with $30,000 in cash for the down payment, you offer your equity in your existing property as part of a blanket loan.

The lender puts a second lien against your existing property and attaches a lien against the new property you buy. Thus, they have liens against two properties, so if you default, they foreclose on both.

It’s another way to tap equity in your existing properties beyond refinancing or taking out a HELOC against a rental property.

Speaking of refinancing, some property owners refinance several separate loans into one blanket mortgage. In doing so, they consolidate into one loan, possibly with a lower interest rate or a more favorable term.

House Flippers

Investors who flip houses can also use blanket loans to buy multiple properties at one time under one loan.

They don’t have to pay off the entire mortgage as they complete the renovations and sell off each property. They either pay the loan balance or buy an additional property under the blanket loan.

Real Estate Developers

Similarly, property developers use blanket real estate loans to buy large tracts of land, which they subdivide and then build on.

They sell individual plots one by one and either pay down their loan balance or acquire new tracts to place under the blanket loan.

Business Owners

Businesses buying several new locations often use a blanket mortgage. It works just like a residential mortgage, with one loan covering several commercial buildings.

Or, businesses can offer up existing properties with equity as additional collateral to avoid a down payment.

Finally, businesses can refinance multiple commercial mortgages into one blanket loan. It works the same way for them as for residential landlords.

Who says you need a separate loan for every single property?

As you scale your real estate portfolio, it can get tricky to borrow and manage individual loans for every residential property. It also limits your financing options and your ability to pull equity out of existing properties.

Enter: blanket mortgages.

Some investors refer to blanket mortgages as portfolio loans, but portfolio loans have another definition: loans held privately on a lender’s portfolio. That’s opposed to being sold off to huge financial institutions like traditional mortgage loans are.

However, as simple as the blanket mortgage definition, its uses and applications get more nuanced.

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Pros of Blanket Mortgages

As with everything else in investing (and life), blanket real estate loans have their fair share of pros and cons.

Make sure you understand both before committing to this type of financing!

Lower Closing Costs

Every time you hold a real estate settlement, you incur closing costs. Buying, selling, and refinancing all involve thousands of dollars in closing costs.

So, rather than holding five different settlements when you buy a portfolio of investment properties, why not hold one?

Lenders charge flat fees in addition to points (based on the loan amount). By taking out a single mortgage rather than five, you only pay one set of flat fees.

The same principle applies to title fees—while title companies charge by the title search, they also charge many flat fees per settlement. Doing one settlement means paying one set of those fees.

More Negotiable Loan Terms

When you take out ten garden variety $200,000 landlord mortgages, you don’t have much negotiating power with any of them.

They pay more attention when you approach a blanket mortgage lender about a $2 million loan. They want your business.

Plus, it involves less work for more money on the lender’s part. They only have to process and underwrite one loan, not five or ten.

This means borrowers can often negotiate a lower interest rate, lower points, or otherwise favorable loan terms, which can, in turn, mean better cash flow and higher returns on their properties.

Simpler Money Management

If you only have one loan to pay and manage each month, rather than 10, 20, or 50, it keeps your accounting simpler.

In contrast, keeping track of dozens of monthly mortgage payments can confuse you and your books.

Avoid Down Payments by Tapping Equity

Real estate investors can use a blanket mortgage to buy properties with no money down if they offer up existing properties with equity as additional collateral.

No refinancing is necessary, no HELOC, and no selling your existing properties to fund future purchases.

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Cons of Blanket Loans

Blanket mortgages come with downsides, too, not just perks. Remember the following as you consider taking out a blanket real estate loan.

Pooled Risk

First and foremost, when you pool multiple assets under one loan, you pool a certain amount of risk.

If you default, you lose not one property but all the individual properties under the blanket loan to foreclosure.

If you keep your loans separate, then you also isolate each one. You can default on one loan and only risk losing that one property.

Shorter Loan Terms

Blanket mortgage loans often come with short loan terms, often 10 or 15 years. Those may be amortized over just 10 or 15 years, with monthly payments calculated accordingly. Or the monthly payments may be calculated on a longer amortization schedule with a balloon payment due after 5-15 years. (A balloon payment requires the loan to be paid in full, even though the monthly payments were calculated on a longer schedule.)

In contrast, residential mortgage loans usually allow up to 30-year terms, and commercial property loans typically allow up to 25-year terms. These longer terms mean lower monthly payments and more flexibility when paying off your loan.

Short-term loans can add interest rate risk, which is the risk that financing will cost more by the time the balloon “pops.”

Fewer Lenders Offer Blanket Mortgages

Not all lenders offer blanket loans. In fact, most don’t.

Conventional mortgage lenders following Fannie Mae or Freddie Mac loan programs don’t typically allow blanket mortgages.

Many portfolio lenders — who keep their loans in-house on their books rather than selling them — don’t allow them either. Portfolio lenders come in many shapes and sizes, from local community banks to online lenders like Visio and Kiavi to commercial lenders.

Build your financing toolkit now so you have many lending options before you have an off-market deal lined up that needs to close quickly.

More Lender Scrutiny

Blanket mortgages are more complex for the lender, and because they have a higher loan amount, they are scrutinized more closely.

Lenders may require higher credit scores for these loans or offer lower LTV (loan-to-value ratios) loans. You may end up with the bank manager underwriting your loan rather than the run-of-the-mill underwriter that normally reviews loan files.

Where to Borrow Blanket Mortgages

Since fewer lenders actually offer them, it raises an important question: Where can real estate investors take out a blanket loan?

Start by inquiring with the lenders you already work with. Portfolio lenders who specialize in working with real estate investors often allow them. Here are a few lenders to reach out to:

• • Visio
  • Kiavi
  • Lending One
  • Civic Financial
  • RCN Capital
  • Lendency (short-term purchase-rehab loans only)

You can also contact local community banks to ask if they offer blanket loans to real estate investors.

Finally, for commercial lenders and construction loans, try out:

• • RCN Capital (commercial & mixed-use)
  • Commercial Loan Direct (commercial or construction, minimum loan: $1 million)
  • Lendency (construction loans)

Blanket Loan Fees

What do blanket loan fees look like compared to conventional loans or other types of mortgages?

While you’ll probably pay just as much in loan points, you can expect to save money on flat fees. Instead of paying flat junk fees for each mortgage, you only pay one set of fees.

However, you’ll still need to pay appraisal fees for each collateral property.

Blanket Loan Eligibility and Requirements

Unlike traditional home loans, lenders scrutinize these applications much more carefully – and for good reason, given the higher loan amounts and complexity involved.

Most lenders require a minimum credit score of 680, though many prefer 720 or higher. You’ll typically need to show a debt-to-income ratio below 45% and substantial cash reserves—often 6-12 months of mortgage payments for all properties combined.

Experience matters, too. However, it’s not a hard rule. Some lenders may consider first-time investors if they show other strong qualifications.

Your business plan is also useful. Lenders may want detailed financial projections like expected rental income, maintenance costs, and even your exit strategy. They might also look at the properties themselves—most require them to be in good condition and in markets with stable or growing real estate values.

The Process of Getting a Blanket Mortgage

Securing a blanket mortgage takes more preparation than a traditional home loan. Before you start looking for deals, you’ll need to assemble a comprehensive package showing lenders you’re a serious investor.

Start by gathering your paperwork. You’ll need documents like tax returns, recent bank statements, evidence of your rental property experience, and detailed financial records for any existing properties. Have those purchase agreements and property inspection reports ready for new purchases.

The next step is connecting with the right lender. Circle back to the lenders we mentioned earlier, you can start there. Local community banks often offer surprising competitive terms, so pay attention to them. Also, compare rates, terms, and release clause conditions across multiple lenders.

Your formal application comes next, along with that solid business plan showing how you’ll manage these properties profitably. Expect a longer underwriting process—typically 45-60 days. However, it’s worth noting that complex blanket loans can take up to 90 days. The lender will need appraisals for every property involved and will dig deep into your financial background.

You’ll receive a commitment letter spelling out all terms and conditions if approved. This is where having a good real estate attorney pays off – have them review everything before you sign. Once you’re comfortable with the terms, you’ll move to closing, where you’ll sign the final documents and receive your funding.

Tip: Plan for this process to take 60-90 days from funding application. Having your documentation organized from the start can help speed things along, but blanket mortgages simply take longer to process than traditional loans.

Blanket Mortgage FAQs

It’s time to address some frequently asked questions regarding blanket loans. Feel free to reach out to us if you have more questions. 

How Do Blanket Mortgages Impact Credit Scores?

The initial hit to your credit score from a blanket mortgage application is similar to any mortgage inquiry. Regular payments can boost your score over time, but remember – a default could damage your credit more severely than defaulting on a single property loan since multiple properties are involved.

Is Refinancing Possible with Blanket Mortgages?

Absolutely. You can refinance into another blanket mortgage or split it into individual loans. The key is timing—look for favorable interest rates and strong property appreciation. Just remember that refinancing multiple properties at once means multiple appraisal fees.

What About Property Management?

Although the mortgage may be combined, you’ll still manage each property individually. Most successful investors use property management software to track separate income and expenses, even though they make one monthly mortgage payment.

Are Blanket Mortgages More Expensive?

Not necessarily. While interest rates might be slightly higher than traditional mortgages, you’ll save on multiple closing costs. The real cost advantage comes from streamlined management and leveraging equity across properties.

Can I Add Properties Later?

Many blanket mortgages allow you to add properties, but it usually requires a modification of the loan terms. Some lenders are more flexible than others, so if you plan to expand, discuss this upfront.

Final Thoughts on Blanket Mortgage

What is a blanket mortgage? Useful, that’s what.

As you scale your real estate portfolio and explore pooled property purchases (say that five times fast), blanket loans can save you money and simplify your books. As you build equity in existing properties, this type of loan offers another way to tap into that equity and avoid down payments when buying additional properties.

Start networking with blanket mortgage lenders before you actually need them, so you can move quickly on your next deal.♦

How do you plan to use blanket mortgages for your own real estate investments?

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