A blanket loan (or blanket mortgage) is one mortgage that uses two or more properties as collateral so a borrower can finance multiple assets under a single note. Example: an investor borrows one loan to buy five rental homes and makes one monthly payment covering all five properties.
Blanket loans matter to real estate investors, developers, house flippers and businesses with multiple locations. They reduce closing costs, simplify loan administration and allow phased selling or development through release clauses. They are uncommon for single-home buyers.
All properties listed on the loan document secure the same debt. That cross-collateralization means each deed of trust or mortgage ties to the single loan; if the borrower defaults, the lender can enforce remedies across any or all secured properties.
Structure: one promissory note and one loan agreement secured by multiple parcels. The loan may amortize over a set term or include a balloon. Payments are consolidated into a single monthly (or quarterly) payment that services the aggregated debt.
A release clause lets the borrower remove (release) a property from the blanket lien when certain conditions are met—usually payment of a calculated release price plus any release fee. Pricing models vary: fixed fee + pro rata principal paydown, percentage of sale proceeds, or an LTV-based paydown tied to the property’s appraised value.
Investors with multiple single-family rentals or a mix of small multifamily buildings often use blanket mortgages to refinance or buy portfolios, simplifying cash flow and consolidating liens.
Small commercial portfolios (retail strip centers, offices, mixed-use buildings) can be financed under a blanket mortgage to reduce costs and allow portfolio-level management.
Developers use blanket loans for subdivisions and multi-phase projects. The loan can fund land acquisition, infrastructure and construction draws, with release clauses freeing lots as they’re sold.
Blanket loans on raw land or platted lots let developers sell lots one-by-one while the loan remains in place for unsold parcels, using releases tied to lot sales and escrow paydowns.
Lenders set minimum portfolio values and sizes (e.g., $500k–$1M minimum in collateral) and may limit property types. Occupancy requirements differ: stabilized rentals usually get better terms than speculative or vacant assets.
Lenders typically prefer clear entity structures (LLCs per property or a single LLC for the portfolio), up-to-date operating agreements, personal guarantees from principals, and financial statements (tax returns, K-1s) proving capacity and experience.
Common release pricing methods:
Process steps: contract for sale → buyer’s closing pays seller → borrower pays release amount to lender (payoff portion + fee) → lender issues lien release for that property → remaining loan balance is re-amortized across remaining collateral per the loan agreement.
Rates and terms vary by lender and collateral type. Typical ranges:
Expect appraisal fees for each property (or a phase appraisal), title and recording fees for multiple parcels, release fees, origination and legal fees, and occasionally prepayment penalties or yield maintenance on commercial blankets.
Blanket loans can be recourse (personal guarantees) or non-recourse with carve-outs. Watch covenants on additional debt, transfer restrictions, maintenance, insurance, and requirements for replacement reserves and reporting. Defeasance clauses are more common with CMBS-style products.
Because collateral is pooled, trouble on one property (e.g., vacancy, damage, environmental issue) can impair the borrower’s ability to service the entire loan and put all secured properties at risk.
Lenders typically foreclose on the loan as a whole; they may choose to foreclose on a specific parcel first to liquidate value. Priority issues arise if prior liens exist—clear title is critical.
Borrowers can negotiate waivers, temporary forbearance or modified payment plans. Lenders sometimes allow partial releases in exchange for cure payments or additional collateral. Proactive communication and documentation of recovery plans help.
Blanket loan: one loan secured by multiple properties with release clauses. Portfolio loan: often used interchangeably but can mean a lender retains multiple individual loans on their books. Individual mortgages: separate loans and liens per property—more flexible sale ability but higher combined closing costs.
Construction often uses short-term draws; mezzanine debt can fill capital gaps without additional deeds of trust but increases overall leverage and cost. Consider hybrid structures: blanket for land and separate construction loans for buildings, depending on lender appetite.
Refinance to individual loans when properties are stabilized, sales are imminent, or when you want to reduce cross-collateralization risk and have sufficient equity in each asset to qualify on its own.
Entity transfers (selling an LLC that owns property vs. selling the property) can trigger lender consent requirements under the loan agreement. Lenders may require guarantors, change-in-control provisions, or loan assumptions with fees if ownership changes.
Sale proceeds used to pay a release may change taxable gain calculations. Consult a CPA: proceeds, basis, and debt paydown influence capital gains or 1031 exchange eligibility. Lender releases can complicate exchange timelines—coordinate early with tax counsel.
Confirm clear title on each parcel, check for prior liens or easements that affect marketability, and ensure the loan documents specifically identify parcels and outline release mechanics to avoid disputes at sale.
Suggested clause: "Upon receipt of written notice and payment of the Release Amount (calculated as Property Appraised Value × Current Loan-to-Value Ratio + administrative fee of $X), Lender shall, within 7 business days, execute and record a release of lien as to the Released Parcel, without requiring refinancing of the remaining loan balance." Tailor fee and timing terms to your negotiation.
Look to regional banks, credit unions, life insurance companies, community banks, specialty commercial lenders and mortgage brokers. Larger banks and life companies often finance stabilized, lower-LTV portfolios; specialty lenders handle riskier or construction blankets.
Brokers can shop multiple lenders and find niche products; direct lenders might offer faster underwriting and deeper relationship pricing. Choose based on deal complexity and your experience level.
Lenders focus on pooled DSCR, aggregate LTV, historical and pro forma occupancy, and required cash reserves for repairs, vacancy and debt service.
Situation: Investor owns five rental homes appraised at $300,000 each (total portfolio value = $1,500,000). Lender approves a blanket loan with a pooled LTV of 70% → loan amount = $1,050,000. The loan includes a release clause: release payment = property appraised value × pooled LTV + $5,000 release fee.
Sale example: Investor sells one house for $300,000. Release payment = $300,000 × 70% + $5,000 = $210,000 + $5,000 = $215,000. At closing the investor pays $215,000 to the lender; the lender issues a release for that parcel and re-amortizes the remaining $835,000 loan balance across the four remaining properties.
Situation: Developer owns 20 lots with aggregate appraised value $3,000,000 and secures a blanket construction/land loan of $2,100,000 (70% pooled LTV). Lender provides phased draws for infrastructure; each lot has a per-lot loan allocation of $105,000 ($2,100,000 ÷ 20).
Phased sale & release: As a lot sells for $150,000, release payment = lot sale value × pooled LTV + $2,500 fee = $150,000 × 70% + $2,500 = $105,000 + $2,500 = $107,500. Lender receives the release payment, issues a lien release for that lot, and reduces the loan balance. Construction draws were paid earlier based on milestones and inspections.
In both scenarios, selling a property requires paying the release amount per the loan docs—coordinate early with the lender to avoid closing delays. In default, the lender can pursue foreclosure on one or multiple parcels; both investors and developers should have contingency reserves and plans (waivers, forbearance requests, or asset sales) to mitigate lender action.
Not exactly. "Blanket loan" specifically means one loan secured by multiple properties with release mechanics. "Portfolio loan" can refer to a lender-held package of individual loans or a mortgage that finances a portfolio; terms vary by institution.
Yes—if individual properties have enough equity and meet lender underwriting criteria. Refinancing can reduce cross-collateral risk but may increase total fees and require multiple closings.
A foreclosure on one parcel can impair the pooled collateral and trigger defaults or lender remedies across the loan. Lenders may choose to foreclose strategically or demand cures; borrower remedies include negotiating partial releases or arranging short-term cures.
They’re more common for investors with multiple properties or developers. Small investors with only 2–3 properties may still use a blanket loan, but lenders typically expect minimum portfolio size, reserves and experience.
Simple formulas you can use:
Example (from Scenario A): Loan Balance $1,050,000 ÷ Total Value $1,500,000 = 70% pooled LTV. Release Price for a $300,000 house = $300,000 × 70% + $5,000 = $215,000.
Bring a simple spreadsheet with aggregated values, NOI by property, rent roll, and proposed release formula. Ask the lender to confirm their release calculation and provide sample release scenarios so you can compare options side-by-side.
Talk to a mortgage broker to find lenders, a real estate attorney to review loan documents (release language especially), and a CPA to assess tax and cashflow implications. For construction or development deals, include a project manager or civil engineer early.
