Blanket Loan or Commercial Loan?

Question

Hello,

I am looking for a loan product that I don't really know the name of. I have 4 rental properties, all of them have a mortgage on them, some have 2 mortgages. I am looking for something where I can combine all of them into 1 mortgage payment, and possibly even pull from the equity that is available on those.

I have a client who has about 12 homes and has that exact product (minus the line of credit I think) and he called it a commercial loan. An other person called it a blanket loan. Not sure what I am shopping for or if anybody else out there has something similar in place?

Doug Smith · Answer

As a long-time lender here with a strong commercial background, I can tell you this...I am not fond of blankets. The issue you often run comes when you want to sell or release one property from the loan. Loan officers will say it's "no problem"...until it's time to actually release the property. The it's not that easy. You'll need to examine a loan covenant knows as a "partial release clause". That defines the terms in which a lender will release one or more of the collateral properties. Here's an overly simplified example. Let's say that you have four identical properties as collateral for one blanket mortgage of $400,000. They might have a partial release clause that assigns a value to each property and then requires you to pay more than that property's share, usually around 125% of that share to release one property. So back to our example. If you want to sell just one of the properties, it will need to be released. If each of the 4 properties was assigned $100K of the balance, then in our example you would need to pay the loan down by $125K in order to release just that parcel. That is a partial release clause and you have to make sure that's in there if you do a blanket. Does that make sense? It sounds easy and you might here "it's not a problem up front", but it has been my experience that servicers make it difficult to complete the partial release. I hope your deal goes well. Good luck.

Steve Cooper · Answer

Hi Jordan,

This is a good question and as a licensed broker owner I agree with Doug that the partial lien release becomes an issue, and the LTV will be capped around 60%. We've had more success providing individual loans for each property, rates are slightly lower, and LTV's will be around 75%

Doug Smith · Answer

Thanks @Vontay Callahan! You were my 2000th vote!

Vontay Callahan · Answer

Jordan — you’re on the right track. What you’re describing is typically called a portfolio loan or blanket loan, and it falls under the commercial lending umbrella even though the properties are residential.

Lenders use different names for it, but the structure is the same:

• One loan covering multiple properties
• One monthly payment
• Ability to tap into combined equity
• Underwritten based on the portfolio performance, not each property individually

It’s a solid option when you’ve got several rentals with scattered mortgages and want to simplify or pull cash for the next acquisition.

If you want to compare options, look specifically for:

• Portfolio/Blanket DSCR lenders
• Commercial lenders that do 5+ property loans
• Local/regional banks (they often give the best terms on these)

Happy to point you toward lenders who are actively doing these right now if you want to explore it further.

Vontay Callahan · Answer

it doesn't matter but is good to know im going to send you a dm in one second

Jordan Epping · Answer

Thanks Vontay! Yes, I would love a couple recommendations for lenders that are currently doing those types of loans. All of my properties are in Wisconsin, as am I, if that matters.

Blanket Loan or Commercial Loan?

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