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Blanket Mortgage Loans in Canada

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Blanket Mortgage Definition: A blanket mortgage is financing that covers multiple plots of land in a purchase by one borrower. Frequently, land developers will use the blanket mortgage to buy a larger piece of land for the purpose of splitting it into numerous separate parcels for development or resale. Instead of having to mortgage each lot independently, a borrower can use a blanket mortgage to cut down on financing costs and boost efficient use of time.

What is a Blanket Mortgage

Homeowners also use blanket mortgage loans to finance the building of a new home. They use the financing to get at the equity in their existing home and use it to pay a new down payment and closing fees for the new dwelling. This blanket loan allows the borrower to finance their new home and begin construction even before the sale of their old house.

Blanket Mortgage Example

In addition to these basic uses of the blanket mortgage loan, Amansad Financial has helped clients make a number of purchases reality that would not have happened if they had been forced to finance each purchase separately. One example is the “flip” purchase. In this case, an investor wants to swoop in, buy a property at a depressed price, make some repairs and renovations, and then turn the property back over and sell it at a cool profit. The time frame on a “flip” is often very fast, sometimes even during the initial pre-closing period but generally within a few months. The purpose of a blanket mortgage is to give these investors, in this case, the ability to access their home equity in order to turn a profit. By taking out the blanket mortgage and then paying it of when they flip the house successfully, these borrowers build a solid relationship with those providing the financing, leading to ongoing financing relationships.

Another common use of the blanket mortgage involves purchasing a second home out in the country. As people decide that they want to add a beach house or a country home as a retreat away from city life, but they lack the funds to pay cash for that house. The purpose of a blanket mortgage is to give borrowers access to the equity they have already built up in their existing home and convert it into leverage supporting a loan for that new house without actually having to take out a second loan. This way, borrowers can get that house in the country that they want.

Blanket Mortgage Requirements

The key in securing a blanket loan is finding the sort of collateral that a lender will find sufficient. The good part about a blanket mortgage in this vein is that the collateral consists of multiple properties. This gives Blanket Mortgage Lenders more reasons to approve the loan, because in the unfortunate event that the loan goes into default, the bank will have multiple assets to seize and sell. Whether a borrower is using this to buy up land, add a second home to his assets or start buying up land as an investment, the more collateral the borrower has on hand, the more financing options a borrower will have with a blanket loan.

For those new to real estate investments, it is important to note that blanket mortgages are not designed to be a long-term solution. After you use the blanket loan to acquire the property you want, make punctual payments for six months to a year, and then approach a traditional lender to refinance the loan over a longer term if you are not ready to satisfy the balance of the loan at the end of that time. For those who are in the position to take on this sort of loan, blanket financing can give you the flexibility you need to turn some significant profits in the real estate market. With prices edging their way up, there is the real possibility that you can find depressed properties and turn them back around to bring in significant profits, even if you have to make significant upgrades to the property.

Apply for a blanket loan

If you are curious about blanket loans and your own real estate situation, get in touch with Amansad Financial to find out the best way to make one of these work for you. The time to strike in the real estate market is now, and Amansad Financial stands ready to help.

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Daniel K. Akowuah | Mortgage Professional / DLG Underwriter
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