Blanket Mortgage

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A blanket loan is one where there is just one promissory note (I promise to pay $10 million ...), but the note is secured by several different mortgages on several different non-contiguous parcels. If the parcels were contiguous (touching), it is customary for the lender to use just one mortgage and to include each of the contiguous parcels in the legal description of the property. Where the properties are clearly different and separated from each other, it is customary to use a separate mortgage for each separate property.

 

So why would a borrower want to get a blanket mortgage? He might think that he is saving money on closing costs by making the loan just one big deal. In addition, the larger the commercial loan, the slightly lower the interest rate.

 

But commercial lenders in general do not like to blanket properties, especially if the properties have different uses. Few commercial mortgage lenders would jump at the opportunity, for example, to make a blanket loan across an apartment building and an office building. This is especially true if the commercial mortgage lender loved apartment loans but hated office building loans because they are over-built, or vice versa.

Real Estate Investors often use Hard Money Loans at high interest rates and will use a Blanket Loan to refinance to a lower rate or to get Cash out.