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You’ve heard the phrase “time is money”, and this is especially true for you as a real estate investor.
When the right properties become available, there’s often competition — and whoever has the funds readily available almost always wins.
Have you lost out on a fantastic real estate investment because you didn’t have available funds?
If you know the pain, there are many solutions to keep it from happening again.
One of those solutions provides funds to buy multiple properties without going through the loan approval process on each house called a blanket mortgage.
Let’s take a closer look at how a blanket mortgage can give you a competitive advantage in the real estate marketplace.
What is a Blanket Mortgage?
By definition, a blanket mortgage is a single mortgage that covers two or more real estate properties.
A blanket mortgage allows investors and developers to acquire or develop multiple properties at once with only one loan payment per month.
What Are the Advantages of a Blanket Mortgage?
There are several advantages of a blanket mortgage. They include:
Buying Power and Convenience
A blanket mortgage provides investors the opportunity to make quick and bulk real estate purchases without having to wait for individual loans and closings on each property.
Simplicity
A blanket mortgage provides simplicity for investors who own multiple properties.
The addition of new properties, or deletion of sold ones, happens without the need to refinance with a blanket mortgage, another great advantage.
Economical
A blanket mortgage helps investors save time and money by only having one monthly mortgage payment.
A blanket mortgage also saves money on the front end because you only have closing fees for one mortgage regardless of the number of properties included.
What are the Disadvantages of a Blanket Mortgage?
A blanket mortgage is not without disadvantages. These disadvantages include:
Risk
All of the properties within the blanket mortgage serve as collateral for the loan, which means all can be subject to foreclosure if you default on a blanket mortgage.
That’s a tremendous disadvantage.
Availability
Keep in mind that many lenders do not offer a blanket mortgage.
Out of Pocket Costs
A blanket mortgage has more stringent approval guidelines than a traditional mortgage.
According to LendingTree, you can expect to pay at least 25% down on the front end of a blanket mortgage and have a balloon payment in 3 to 15 years.
Examples When a Blanket Mortgage Makes Sense
When does a blanket mortgage make sense for a real estate investor?
A blanket mortgage can be an ideal solution for investors who are:
Developers
A blanket mortgage allows developers to create neighborhoods by purchasing large tracts of land, subdividing it, and then building new homes to sell.
Flippers or wholesalers
A blanket mortgage provides a lending solution to investors who want to buy often, or in bulk, and sell shortly afterward without having multiple closing expenses and documents, such as flippers or wholesalers.
Landlords
A recent Rental Housing Finance Survey found that more than half of rental units have mortgages.
A blanket mortgage is an excellent tool for landlords who own multiple properties, including apartment complexes and don’t want the hassle of multiple mortgages each month.
Blanket Mortgage FAQs
Next, we’ll explore a few of the most frequently asked questions associated with a blanket mortgage.
Q. Where Can I Find Blanket Mortgage Lenders?
According to Bankrate, your best bet for a blanket mortgage is with a commercial lender.
Do some research and find the lender with the best blanket mortgage rates and terms for you.
Q. What are Blanket Mortgage eligibility requirements?
A blanket mortgage has a higher face value than a traditional mortgage, which means applicants face higher scrutiny and larger down payments.
A high credit score, low debt-to-income ratio, and a financially healthy business can help you qualify for a blanket mortgage.
The Bottom Line: Blanket Mortgage
Real estate investing is a competitive market where you want to be able to take quick action when you find properties with profit potential.
A blanket mortgage is a tool that gives you the leverage you need to expedite purchases for your real estate portfolio.
Deciding whether or not it’s right for you is another step to take to improve your real estate education.
