Blanket Mortgage
A single mortgage loan that covers multiple properties, typically used by real estate investors or developers who want to finance several properties under one loan arrangement. The mortgage creates a lien against all properties included in the blanket loan, and often includes release clauses that allow individual properties to be sold and removed from the mortgage upon payment of a specified amount.
Example
“The developer used a blanket mortgage to finance all five lots in the subdivision, then released each property individually as houses were built and sold.”
Memory Tip
Blanket mortgage = like a blanket covers multiple pillows on a bed, one mortgage covers multiple properties.
Why It Matters
Blanket mortgages allow investors to finance multiple properties more efficiently than obtaining separate loans for each property, often with better terms and lower overall costs.
Common Misconception
People often think that selling one property under a blanket mortgage automatically releases it from the loan, but a specific release clause and payment are typically required.
In Practice
A developer purchasing five lots for a subdivision might use a blanket mortgage to finance all five, then negotiate release clauses allowing each lot to be removed from the mortgage for $50,000 as individual homes are built and sold.
Etymology
The term 'blanket' comes from Old French 'blanchet' (white cloth covering), metaphorically describing how one mortgage 'covers' or encompasses multiple properties like a blanket covers a bed.
Common Misspellings
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