Blanket Mortgage

A blanket loan is one type of mortgage loan that funds more than one real property purchase. Blanket loan is also known as blanket mortgage. The blanket loans are mostly taken by the builders and real estate developers. The builders generally buy a large area of land and develop real estate property as segments and blocks. In stead of getting new mortgages for each part of the property, the builders use the blanket loan to cover the entire property. When one parcel is sold, that part of the blanket mortgage is released while the remaining mortgage is kept intact. This makes the most important part of this blanket loan.

The concept of blanket loan varies from any traditional loan where the borrower needs to make the payment of entire loan balance when the securing property is sold. This is known as the “release clause” of the blanket loan and this helps to sell and purchase the multiple property units with the single mortgage convenience.

In other words, it can also be said that the blanket loan refers to the mortgage type that covers multiple real estate segments that is owned by the mortgagor. While purchasing a properties portfolio, getting one loan in order to cover the entire portfolio is also possible.

The concept of blanket loan is also adopted by the individual borrowers when they want to make the transition between selling the existing house and purchasing a new one, comfortable and easy.

The biggest advantages of blanket loans are its flexibility and efficiency. Having a blanket loan means that the individual would be liable for only one mortgage payment but not two. The home developers can sell off the property portions without the continuous refinancing of the associated debts. In any case if the borrowers default the loan, the financial institution or bank takes control of all of the property.

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Last Updated on : 1st July 2013

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