When you have many different properties and are looking to consolidate them all into one loan, you may want to consider getting a blanket mortgage. What is it, how does it work, and when should you get one? This guide explains everything you need to know about blanket mortgages so that you can make an informed decision about whether or not they are right for you.
What is a blanket mortgage?
A blanket mortgage is a type of home loan that includes multiple mortgages within one overall agreement. This allows borrowers the ability to receive more funds than with just one mortgage. For example, if you want to renovate your kitchen but need more money, you can use a new mortgage as long as it has been approved by the lender. Remember, not all lenders offer blanket mortgages and those that do may charge higher interest rates due to additional risk associated with this type of loan.
Types of Blanket Mortgages
There are two types of blanket mortgages that most people choose fixed and adjustable. Fixed mortgages have the same monthly payment rate, or interest rate, throughout the life of the loan. Adjustable loans can change the interest rate in the future if certain conditions are met.
Should I get one?
We all know that buying a home is an expensive undertaking, and getting the right mortgage can save you thousands of dollars in the long run. If you’ve found your dream home but don’t think your budget will allow it, then it’s time to consider getting what’s called a blanket mortgage.
What are the differences between bank loans, home equity loans, and second mortgages?
One of the main differences between home equity loans and second mortgages is that home equity loans are secured by your property and second mortgages are unsecured. If you cannot make monthly payments on an unsecured loan, you might lose your house. These two loans can be tricky to get with lending standards being strict. Banks will only give you a second mortgage if they know they can take the property in foreclosure should you not pay back the loan. Home equity lines of credit (HELOCs) do not require collateral but they often come with variable interest rates and fees which vary based on how much money is borrowed and how long it takes to repay the line of credit.
How much can I borrow?
If you are borrowing more than one property, the blanket mortgage usually has an aggregate limit of 75%. A lender may lend up to 95% on your combined mortgages if there is sufficient equity in your properties. However, it is important that you consider whether there is sufficient equity in your properties. Equity can be found by deducting what you owe on the property from its market value. The combined outstanding mortgages plus available equity cannot exceed 100% of the market value of all your properties. When considering this question, it is important that you take into account any other secured debts or other liabilities (e.g., home loans) which reduce the amount of available equity in each property and that you have enough equity remaining after those obligations are met to meet the amount borrowed through the blanket mortgage.
Can I refinance it?
While the term refinances has traditionally been used when talking about obtaining home equity, it is more often than not used interchangeably with the word refinancing. In reality, these two terms refer to two different things.
Refinancing is when an individual acquires new debt (from another lender) and uses it as payment for the current home loan. This may be done in order to lower their monthly payments or achieve other goals, such as consolidating mortgages into one.
Is it expensive?
Borrowers may be able to use one of the lesser-known methods of home financing called a blanket mortgage, which allows them to have multiple mortgages with different terms on the same property. They are often used in cases where an individual can’t qualify for all of the money they need at once. This type of mortgage offers borrowers more options and flexibility as they work towards their ultimate goal of home ownership.
Blanket mortgages provide borrowers with fixed or adjustable interest rates, which are typically less than traditional mortgages.