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 Sam
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Posted: Thu Apr 01, 2004 3:40 am Post subject: Blanket Mortgage-Borrowing against more than one property
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Blanket Mortgage is a type of mortgage which facilitates the borrowing of money against more than one asset at the same time. It covers a number of properties at the same time. This collateral could be:
- More than one asset as separate entities.
- A property divided into lots.
- A large tract of land yet to develop into a co-operative.
It becomes more convenient rather than taking out mortgages for each property individually and paying for each separately.
It was initiated as a security device for commercial property but today it is applicable for residential areas as well. The loan obtained is used to cover the costs of developing the property. The development costs include, construction costs, architectural, acquisition, etc.
For example, if you take a mortgage of a tract of land of 9 lots for $2,000,000 and then sell each lot at $500,000, you will get $4,500,000 that means, $2,500,000 extra. This could help in repayments.
The benefits of taking up a blanket mortgage are many:
- Comfort level high: One property at a time will involve a number of mortgages and each account needs to be maintained separately. This is more organized.
- Cash for the future: The money could be used for planning, construction and development of an empty land.
- Gives you time: You have the money in hand and so allow you the flexibility to begin work when prices are lower.
- Helps you sell house: There is no restriction on selling the individual lots before the deadline as this would help you in repayments.
The advantage of a blanket lien for co-operative developers is maximum. Each resident family need not qualify individually for the mortgage. They only need to contribute monthly to the repayment. As the mortgage is in bulk, the individual costs are reduced considerably.
Since the owner of the land is a single individual, different mortgage would have legal complexities. Moreover in time of default, the possibility of a clash over priority of single mortgage does not arise.
The partial release clause in blanket lien is an added plus. If you want to release a single lot, you can repay a specific portion of the debt. But, this clause needs to be asked for from the lender. Some blanket mortgage lenders may even charge fee for including this clause at closing.
Blanket lien is applicable to present and future properties, especially catering to land developers and real estate investors. So, a blanket mortgage is a bundled package but the borrower can unbundle at will.
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