A blanket loan , or blanket mortgage , is a type of loan used to fund the purchase of more than one piece of real estate . Blanket loans are popular with builders and developers who buy large tracts of land, then subdivide them to create many individual parcels to be gradually sold one at a time. Rather than securing a new mortgage each time a portion of the development is sold, the borrower uses the blanket loan to buy them all. Once a mortgage remains intact, the mortgage remains intact.
Traditional mortgages typically have a ” due-on-sale clause “, which stipulates that if the mortgage is sold, the entire mortgage must be paid in full immediately. With a blanket mortgage, a “release clause” allows the sale of portions of the secured property and the partial repayment of the loan. This property is located in the heart of the city.
A builder, for example, might use a blanket mortgage to pay for construction of several homes in one neighborhood. When a home is sold, the portion of the mortgage that was used to fund that home is paid back to the lender, and then retired. The remaining outstanding balance is adjusted accordingly, and the blanket mortgage continues to phase into this manner, and all mortgage is repaid and retired.