A blanket mortgage covers multiple properties under a single loan instrument. For real estate investors with portfolios of 5 or more properties, a blanket structure can simplify management, reduce individual closing costs, and unlock equity that would be inaccessible under property-by-property LTV constraints. The tradeoff is concentration risk and the loss of individual property financing flexibility.
Minimum Portfolio Requirements
Most blanket mortgage lenders require a minimum of 5 properties in the portfolio, with some setting the floor at 10. The properties must be residential (1-4 unit), individually assessed, and collectively produce sufficient DSCR to qualify. The lender underwrites the portfolio's aggregate income against the aggregate debt service. Individual properties with negative DSCR can be acceptable if the portfolio as a whole exceeds the minimum DSCR threshold, typically 1.20x to 1.25x on the combined payment.
Release Clause Structure
- ✦A release clause allows the borrower to sell individual properties and release them from the blanket lien without paying off the entire loan
- ✦Standard release premium: 115-125% of the allocated loan amount for the released property
- ✦After the release payment, the remaining loan balance and remaining collateral pool must still satisfy the lender's DSCR and LTV requirements
- ✦Some blanket lenders cap cumulative releases at 30-40% of the original loan amount; releases above that trigger full payoff
- ✦Without a release clause, selling any property in the portfolio requires paying off the entire blanket loan
When Blanket Beats Individual Loans
A blanket mortgage makes sense when: the investor owns more than 10 properties and individual conventional loans are no longer available (Fannie Mae caps at 10 financed properties), some properties in the portfolio do not qualify individually due to condition or LTV, the investor wants a single payment and single servicer for simplicity, or a cash-out refinance of the portfolio would be more efficient under one loan than across multiple individual transactions. The cost of a blanket is typically higher than individual DSCR loans; the decision is usually about access rather than rate optimization.
Aria can identify blanket mortgage lenders for residential rental portfolios and help structure the deal to maximize the release clause flexibility. Ask at vicariointel.com.
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