Blanket loans are well suited for long-term builders, investors, and developers who deal with multiple properties. Each is benefited differently. For example, investors benefit from the reduced loan administration while developers and builders can quickly overcome the typical financing challenge that’s unique to their situation.
Investors who own several properties tend to have a growing business portfolio. As this happens, a blanket mortgage becomes an attractive option. This is because the more properties you own, the more critical it becomes to make sure you coordinate all of the payments on the mortgages. You also need to stay on top of the lender’s requirements for each mortgage, and this can be hard to do. Blanket mortgages allow you to consolidate your mortgages into one, which reduces the amount of paperwork you have to do with both monthly and yearly tasks that an investor needs to deal with.
Additionally, blanket mortgages allow investors a workaround for roadblocks that usually occur when they are limited on the number of mortgages that they can have at one time. And since blanket mortgages reduce the number outstanding loans you have, it allows the investor to pursue additional financing.
Finally, investors benefit from a release clause, which allows them to sell individual properties without affected the terms of the blanket loan. This means that investors can profit off of existing properties without having to pay off the loan. At the same time, they can acquire new properties by adding financing options that already exist to their blanket.
Developers and builders can benefit from blanket mortgages, too. For example, builders and developers can use blanket mortgages to help release liens on their land. Usually, a developer needs to acquire land to build on, but banks won’t give them a construction loan unless the land does not have a mortgage. This is because lenders think that if the developer defaults on the loan that they are given for the lot, then the lender who loaned the construction money is at risk.
But with a blanket mortgage, developers can use the release clause in their favor by requesting that the lot be released from a lien. Say that a developer got a blanket mortgage on a dozen properties, but there is a lien on one of the lots. If there is enough equity in the lot and the lender is OK with it, then the developer can request that the lot be cleared of the lien and move forward with getting a construction loan to start building.