Legal Definitions - blanket mortgage

A blanket mortgage is a single loan that is secured by, or "covers," multiple pieces of real estate. Instead of obtaining a separate mortgage for each individual property, a borrower uses one mortgage to finance several properties simultaneously. This type of mortgage is commonly used by real estate developers, investors, or businesses that own or acquire multiple parcels of land or buildings.

• Example 1: Real Estate Developer

  A real estate developer purchases a large plot of undeveloped land with the intention of subdividing it into twenty individual residential lots and building homes on each. Instead of taking out twenty separate loans for each future home, the developer secures a single blanket mortgage that covers the entire parcel of land. As each individual home is built and sold, a portion of the blanket mortgage is paid off, and that specific lot is released from the mortgage's lien, allowing the new homeowner to obtain their own financing.

  This illustrates a blanket mortgage because one loan encompasses multiple distinct properties (the twenty lots), providing financing for the entire development project under a single agreement.

• Example 2: Property Investor

  An experienced investor owns three separate rental properties: a duplex, a single-family home, and a small commercial building. To simplify their financial management and potentially secure a better interest rate, the investor decides to refinance all three properties under one blanket mortgage. This consolidates their debt from three individual loans into a single, larger loan secured by all three assets.

  This demonstrates a blanket mortgage as a single financial instrument is used to secure debt across multiple, distinct income-generating properties owned by the same entity.

• Example 3: Business Expansion

  A growing manufacturing company needs more space and decides to purchase two adjacent warehouses in an industrial park. To finance this acquisition, the company obtains a single blanket mortgage that uses both warehouse properties as collateral. This allows them to secure the necessary funds for both purchases through one lending agreement rather than two separate ones.

  Here, the blanket mortgage is used to finance the acquisition of two distinct commercial properties under a single loan, serving the business's expansion needs.