What is a Blanket Loan? ~ Getting under the blanket!
It’s a simple term referencing as a blanket covers everything (or everyone) under it, in the world of mortgage finance when a single loan is secured by more than 1 property, then those multiple properties, it could be said, are covered by that blanket loan.
Wrapped in a blanket all warm, cozy and snuggled in. hmmm, Here is another simple analogy. The multiple properties are wrapped in that one blanket loan.
The variety of entities that can benefit from this specific loan product is diverse. From Mom & Pop with a couple rental houses or commercial place of business and a rental or two. Investors with rental properties whether a few or great many properties (This is portfolio lending), Real estate trusts, investors, corporations, developers who subdivide land into parcels and the list goes on. The largest of these players in the real estate field lately are the ones who have scooped up thousands of single family properties at auctions and in bulk from banks and Freddie Mac / Fannie Mae caused by the most recent real estate meltdown and turned them into rentals.
So who will finance these blanket / wrap loans?
Here we have another diverse list: Your local savings and loan bank for mom & pop, to local commercial banks for their relationship clients all the way up to wall street money for the big guys (and girls).
Now it’s not just residential properties and land these will cover!
Multi-family apartment buildings to commercial properties are also prime candidates.
Benefits and drawbacks come with the territory so stay awake under that nice warm blanket for a moment longer while we touch on some of these topics. First of all, it takes some investigating and doing your homework before you go and get under one. Its always smart to consider if you getting under a blanket alone! Because once you put multiple properties under one loan with partners or loved ones, it has even more implications.
While some lending sources require that the properties be held in an entity such as an LLC or Corporation it’s not always the case. And don’t forget to ask, “recourse”? *personally liable* or non-recourse *hey man, don’t look at me if it all goes to hell!
As with any financial decision, you should get good council after you do your first round of inquiries on your own with an experienced loan person (banker &/or broker) your tax person and a real estate attorney so the end result is not a SURPRISE! Some of the simple benefits are the fact that you only have one escrow, and loan to pay for and keep track of. Grouping multiple properties can also benefit to allow to cross collateralize in purchase and refinance situations allowing a or properties with more equity overcome shortfalls of equity poor properties or even reduce / eliminate the need for a down payment on the purchase of additional property. And yes, you can combine a refinance with a purchase simultaneously. Fun stuff huh? But on the other side of the coin, once you put properties together, unless you have predesigned release clauses in the note and deed you may find one or more properties stuck together in the wrapper (pun intended) when you want one or some out!
Need a blanket loan? I’m here to help solve your real estate financing! Please visit my website @ ifundre.net or contact me directly via email- paul@ifundre.net.
