A blanket loan (or blanket mortgage) is a single mortgage that finances two or more real estate properties under one loan agreement, using all included properties as collateral.
Cross-collateralization means every property in the blanket mortgage secures the entire loan. If the borrower defaults, the lender has rights to foreclose on any or all properties under the loan. Cross-collateralization simplifies lender security but concentrates risk — both for borrower equity and lender remedies.
A defining feature is the release clause (partial release). It lets a borrower sell or otherwise detach an individual property by paying a predetermined portion of principal — the release price — so the lender removes the lien on that parcel. Release prices can be fixed amounts, a percentage of original loan, or formula-based tied to appraised value or unpaid principal.
LTV for blanket loans is typically calculated on an aggregate basis: total loan amount divided by the combined market value (or appraised value) of all collateral properties. Lenders may apply caps to individual assets (concentration limits) or weight values conservatively (discounts on recent comps, vacancy adjustments, or haircut factors).
Structures vary: many blanket loans use shorter commercial terms (3–10 years) with either periodic amortization (often 20–30-year equivalent schedules) plus a balloon, or interest-only periods followed by amortizing payments. Interest may be fixed or floating. Developers and flippers frequently see short-term, higher-rate options with a balloon; stabilized investors might negotiate fully amortizing schedules.
Blanket loans often come with recourse provisions or carveouts (bad-boy guarantees) requiring sponsor guarantees for fraud, bankruptcy, tax defaults, etc. Non-recourse structures are harder to secure and usually reserved for larger, stabilized deals or institutional borrowers with strong financials and acceptable property types.
Lenders commonly finance residential lots, single-family investment properties, small multifamily, retail or light industrial portfolios. They may impose concentration limits by property type, geography, or single-asset exposure (e.g., no more than X% of aggregate value in one asset or one submarket).
Blanket loans are ideal when you need to finance multiple properties together and expect to sell or release some assets over time — e.g., lot-by-lot subdivision sales, a flipper with multiple concurrent rehab projects, or an investor acquiring a small portfolio who wants one facility for management simplicity.
Yes, if the loan includes a release clause. The sale process usually requires: buyer underwriting, payoff of the release amount to the lender (often at closing), recording of a partial reconveyance or release deed, and lender sign-off. Timing and costs vary depending on title and local recording processes.
Refinancing a single property within a blanket loan is possible if the lender agrees to a partial release or if an external lender provides a payoff for that parcel. Refinancing the whole loan may be needed if release prices are prohibitively high or if the borrower wants to remove multiple assets. Coordination among lenders and careful payoff calculations are essential.
Default on one obligated payment or covenant can trigger cross-default provisions, allowing the lender to pursue remedies against all collateral. Even if only one property fails operationally, the lender's security interest spans the full pool, so foreclosure, receivership or accelerated payment could affect every property in the blanket.
Partial releases require precise title work. Lenders must record reconveyance documents tied to legal descriptions; subordinate liens (mechanics’, tax liens) complicate releases and sales. Ask your closing attorney to verify chain-of-title for each release and ensure payoff math matches recorded instruments.
Common release formulas include:
Reasonable benchmarks tie release price to recent appraised or sales prices and account for lender haircut and transaction costs. Negotiate caps on release pricing increases and limits on lender-required fees.
Balloon structures reduce periodic payment burden but create refinancing risk at maturity; fully amortizing reduces refinancing dependency but increases monthly payments. Negotiate covenants (DSCR, minimum liquidity, concentration limits) that match your business plan and exit timeline.
Multiple single-asset mortgages avoid cross-collateralization and give borrowers more flexibility to sell or refinance individual properties, but increase closing costs, lender relationships and administrative overhead.
Portfolio loans usually target stabilized income-producing assets and are underwritten to portfolio cash flow; they may be securitized or held on a lender’s balance sheet. Blanket loans are more bespoke and often used for development or phased sales where releases are expected. The two overlap, but underwriting focus and borrower expectations differ.
For development, separate construction loans or lot loans per parcel can match construction draws to specific assets. Sale-leaseback or joint-venture equity structures can reduce debt needs and mitigate cross-collateral risk. Choose alternatives based on capital availability, risk tolerance and exit timing.
A developer purchases 20 lots under one blanket loan. As houses are built and sold, each sale triggers a release payment to remove that lot from the lien, allowing sales proceeds to be deployed into new units.
Ask the attorney to confirm clear legal descriptions for each parcel, identify existing liens, unresolved encumbrances, easements, and mechanics’ liens. Ensure procedures for partial reconveyance are workable and local recording offices accept the documents as drafted.
For business borrowers, lenders may file UCC-1s against company assets beyond real estate; these can complicate subordinate financing. Check county recording requirements for reconveyances and ensure subordinate lien holders sign subordinations or payoff agreements when needed.
When selling a property that’s released, capital gains are generally calculated on that asset’s allocated basis. Ensure your basis allocation method (cost-per-lot or formula) is documented in partnership or tax agreements. Consult a tax advisor about depreciation recapture, installment sales, and allocation of sale proceeds if the blanket loan makes allocation complex.
Blanket loans are typically available from commercial banks with CRE departments, regional lenders, specialty mortgage companies, and private debt funds. Mortgage brokers experienced in investor/developer financing can source multiple options.
A single mortgage that secures multiple properties under one loan agreement, often with release provisions allowing individual properties to be removed upon payment.
All properties act as collateral for the single debt; failure to comply with loan terms can expose the entire collateral pool to lender remedies.
A release clause permits removing a specific property from the lien by paying a release price determined by the loan agreement (fixed, pro rata, or formula-based).
Yes, if the lender’s release clause is met and the release price is paid at closing (and any other lender conditions satisfied).
LTV is usually aggregate: total loan ÷ combined appraised value, with conservative discounts or concentration limits applied by lenders.
Rates reflect risk and term — expect commercial pricing (often higher than conforming mortgages), common terms of 3–10 years, and amortization schedules that may be fully amortizing or include balloons.
Many lenders require recourse or sponsor guarantees, especially for speculative or development deals. Non-recourse options exist but are typically for larger, stabilized transactions with strong borrower profiles.
Yes, if you or a third-party lender can pay the release price and the blanket lender consents to reconveyance; otherwise you may need to refinance the entire facility.
Release price formulas, covenant thresholds (DSCR, reserves), amortization structure, prepayment penalties and bad‑boy carve-outs are primary negotiation points.
Match the loan’s release mechanics, pricing and covenants to your sales schedule, expected hold period and refinancing options. If release prices, balloon dates or covenants conflict with your exit, consider alternative financing or more granular loan structures.
Use a blanket loan when you need one facility to finance multiple assets and plan phased sales or want simplified servicing. Avoid if you need maximum flexibility to sell individual properties quickly without paying significant release fees or if you cannot tolerate cross-collateral risk.
