Reasons to Consider a Blanket Real Estate Mortgage

Why Buyers Use Blanket Mortgages

Buyers, particularly in the commercial real estate markets, use blanket mortgages for a number of reasons. Perhaps your next investment would be better served using a blanket mortgage.

You need to consolidate properties for a refinance - An investor might own multiple properties financed at different times and with very different mortgage terms. If rates are low, it could be possible to group properties together for refinancing with a blanket mortgage. In doing so, payments could be lower in aggregate. It could also allow the owner to take out cash to be used for further investment.

Increase financing for new acquisitions - Suppose an investor wants to develop or rehab a commercial property. The amount of cash needed for the purchase and the work is greater than can be borrowed on that property alone. The buyer could provide other properties in a blanket real estate mortgage transaction. Under the right conditions, the buyer could get more than the necessary funds for the new project.

Better loan terms - By including other properties in a blanket mortgage, the lender is better protected with extra value as security. This can frequently be used as a tool to negotiate better interest rates or other loan terms. If a lower payment allows for a positive cash flow from rents, this might be the way to go.

Sellers can lock in extra property in holding paper - If selling a property and asked to take on some of the financing, a seller can protect their position better if they can get the buyer to use other property they own as further security for the loan.

As we can see, there are very sound business reasons for using a blanket real estate mortgage. If some or all of these criteria are present, buyers, sellers and lenders should consider this alternative.