In real estate investing, blankets aren’t something that keeps you warm. When an investor owns several properties, a lender might give them one loan and use several or all of their properties as collateral. When the mortgage/deed of trust “blankets” all of the properties, that is known as a “Blanket Mortgage/Deed of Trust.”
Blankets seem very simple. You have just one loan to pay with all of your properties under one facility, but they are much more complicated than that. What if you want to sell a property, but keep the loan in place? What if you decide to increase your insurance deductible on one property or self-insure? In these scenarios, a Blanket can really make it harder to do business.
Enter the Partial Release Clause. A Partial Release Clause is a part of your mortgage/deed of trust that lays out a path for you to pay down your loan to a certain level in order to have certain properties released as collateral. Sometimes, the clauses are quite vague, but you can have language written into the deal that states “If the loan is paid down to $X, then I can release a certain property.” Blanket mortgages tend to be a bit more complicated than your standard, run of the mill deal. That means that an attorney often crafts the documents rather than using an off-the-rack note and mortgage/deed of trust. In these cases, you can work out the details of a partial release clause with your lender that will spell out the specific criteria needed in order for you to have a particular property released as collateral. Lenders might not always allow partial release clauses, but it is certainly worth asking about.
In short, Blanket Mortgages/Deeds of Trust can seem convenient, but you will want to negotiate in a way to have a property released as collateral without having to completely pay off the loan.