What Is a Blanket Mortgage and When Should I Use It?

What Is a Blanket Mortgage?

A blanket mortgage is a single mortgage that’s secured against two properties at the same time. Instead of separate financing on each property, one private lender lends against the combined value of both. It’s almost always arranged through a private lender, rather than a bank.

Examples of a Blanket Mortgage

Here’s a situation I’m helping a client with right now.

A retired woman purchased a new build home, planning to sell her existing home before taking possession. The builder moved up her possession date by a couple of months, and suddenly the timing no longer worked.

She hasn’t sold her current home yet, but she needs to close on the new one. As a retiree without employment income, qualifying for traditional financing on both properties isn’t realistic.

The solution is a blanket mortgage through a private lender, secured across both properties. It allows her to close on the new build. When her existing home sells, the mortgage balance is reduced, and we can refinance her out of the private mortgage entirely.

What do I Need to Know About a Blanket Mortgage?

1. Blanket mortgages can actually save on legal costs, since it’s one mortgage registered across two properties rather than two separate legal files.
2. They’re almost always a short-term bridge, not a long-term solution.
3. Private lender rates are higher than traditional financing, so the goal is always to get out of it as quickly as possible.
4. They’re rare. In all the transactions I handle, this comes up only occasionally.

If you’re in an unusual situation where timing or income doesn’t fit the standard mortgage process, it’s important to speak to a mortgage broker. Please reach out at 780-720-2490.

Whether you are preparing to buy your first home or your fifth, if you’re looking to get pre-approved for a mortgage in Edmonton, fill out my online application. I’m here to help you every step of the way.