What Is a Blanket Loan in Real Estate?
A blanket loan, also called a portfolio loan, is a single mortgage that covers two or more properties under one loan agreement. Instead of having individual mortgages on each property, investors consolidate multiple rentals into one blanket loan with a single monthly payment, a single interest rate, and one underwriting process. Blanket loans are an efficient way to scale a rental portfolio.
How Blanket Loans Work
In a blanket loan, all properties serve as collateral for a single note. The lender evaluates the combined portfolio's income, occupancy, and asset quality rather than underwriting each property individually. This allows investors to pool weaker performing assets with stronger ones, as long as the blended DSCR of the portfolio meets the lender's minimum threshold. Blanket loans typically require a minimum of 2-5 properties and may have minimum portfolio value requirements of $500,000 or more.
Release Clauses
One important feature to understand in a blanket loan is the release clause. This provision allows a borrower to sell one property in the portfolio and have it released from the blanket loan without paying off the entire mortgage. Typically, the lender requires the borrower to repay a portion of the outstanding balance (usually 100-125% of that property's allocated loan amount) as a condition of release. Release clauses give investors flexibility to sell or dispose of individual assets within the portfolio.
Advantages for Portfolio Investors
Blanket loans simplify management by consolidating multiple mortgage payments, insurance requirements, and escrow accounts into one. They can also free up equity across the portfolio. If some properties have appreciated significantly, a blanket loan can put that equity toward acquiring additional properties without selling. For investors managing 5-50+ rentals, a blanket loan structure also reduces administrative overhead.
Frequently Asked Questions
Related Loan Program
DSCR Investor Rental Loans
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