What is a blanket mortgage?

A blanket mortgage is a single mortgage that holds liens against 2 or more properties. Blanket mortgages are often used by private mortgage lenders to lessen the %LTV (loan to value), thereby reducing their risk.

Home Purchase Example

For example, let’s say someone is purchasing a home for $500K and they need a short term private mortgage to close the deal. No private lender (that is, no private lender that doesn’t break knees) will lend your $500K to purchase said home. Why? Because they would be financing 100% of it. The purchaser would have nothing to lose; no stake in the game. The LTV would be at 100% in this case. The higher the LTV, the higher the risk for the lender, the worse the terms. You wouldn’t like be able to get a mortgage.

Blanketing Facilitates The Mortgage

Now, let’s say this purchaser had a second home that was also worth $500K and was mortgage-free. The private lender could blanket the mortgage over the two properties. Now the way to look at this is that the lender’s $500K is now secured over $1M total worth of properties. Now the LTV is at 50%. This is a number that most private lenders would be VERY happy about!!