Blanket Loan
A blanket loan allows the borrower to have a comfort of getting financing during a transitional phase. Blanket loan is a type of mortgage which people get on the property and this loan allows that borrower to sell part of the property without worrying about refinancing.
In a traditional mortgage, a borrower would have to pay the balance amount of the mortgage in full when the property, which is used as collateral, is sold. This is not the case in blanket loan. Many land developers use blanket loans to purchase large tracts of land. After using the land to secure the loan, they subdivide the property and gradually sell of parts of it. As each part is sold, that portion of the security is released and the developer ends up making a part down payment on the loan until the entire loan amount is cleared.
This does not mean that as a home owner you cannot avail a blanket loan. In fact many home owners use blanket loans when they are trying to sell their homes and purchase a new one. A blanket loan is usually more preferable when give the other alternatives. The alternatives are having two separate mortgages, taking a short term loan which is very expensive, or selling the current house and then living in a rented one till they can purchase a new home.
The benefit of a blanket loan is that the borrower just has to pay one mortgage instead of two and does not have to opt for refinancing. The borrower can partial payment on loan as and when the sale is made and yet have the funds to buy a new home.
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