Blanket Mortgage

Generally speaking, a blanket mortgage may be described as one when a solitary mortgage includes more than one property of a real estate. Though there is nothing to establish the view, it is commonly believed that the initial notion of the blanket mortgage perhaps started with a person building a house. In this case, the house builder constructing a housing complex venture enters into a contract with a credit financing organization to protect the property or cover it from the economic point of view.

The initial mortgage contract signed by the house builder will include the complete housing project and the credit finance institute will make advance payments to the mortgagor or the debtor in installments with the advancement of the construction venture with a view to enable him to reimburse the bills or expenditures. And once the construction is complete and the houses are ready for sale, the buyer for the first house will approach the builder, enter into a contract with him provided he is sanctioned a loan for purchasing the property.

Having fulfilled these conditions, the mortgagor will then take the buyer to the office of the blanket mortgagee where the buyer's application for a mortgage will be dealt with. Once the buyer's mortgage application is endorsed and the house is sold, the blanket mortgagee or the credit finance institution will remove that particular house from the purview of the blanket mortgage signed with the builder and a separate mortgage contract will be drafted for the new house to be signed by the buyer. Both the mortgagor (builder) and the blanket mortgagee (credit finance organization) will continue the process for each house till all the houses of the project under the blanket mortgage are sold. When this is done, the value of the original blanket mortgage signed with the builder will be reduced to naught and eventually the contract will be nullified or deemed completely executed.

In fact, blanket mortgages are always preferential for mortgagees lending money in large scale as in this case they are not only able to lend out huge sums of money in installments against a secure property that is finally split into small mortgages involving hundreds of people. Moreover, the volume of money lent out to the house builder initially also makes it advantageous for the mortgagees to maintain their budgets and accounts. To be precise, a blanket mortgage is always profitable for money lenders dealing in huge amounts.

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