Using Blanket Mortgages with [DSCR](/blog/what-is-dscr-ratio) Loans

Blanket mortgages are a powerful portfolio financing tool that lets you secure multiple properties under a single loan—simplifying your real estate empire while potentially saving on rates and fees. Combined with DSCR qualification, blanket loans become accessible to investors who don't qualify for traditional financing.

This guide explains exactly how blanket mortgages work with [DSCR loans](/blog/dscr-loan-guide), when they make strategic sense, how to structure favorable terms, and the critical risks every investor must understand before consolidating properties under one note.

What Is a [Blanket Mortgage](/blog/blanket-mortgage-explained)?

Simple Definition: A single loan secured by multiple properties (the "blanket" covers multiple assets).

Standard Financing vs. Blanket Loan

Traditional Structure:

• Property A → Loan A ($200k)
• Property B → Loan B ($180k)
• Property C → Loan C ($220k)
• Total: 3 loans, 3 payments, 3 servicers

Blanket Mortgage Structure:

• Properties A + B + C → Single Loan ($600k)
• Total: 1 loan, 1 payment, 1 servicer

How DSCR Qualification Works with Blanket Loans

Traditional Blanket Loans:

• Require W-2 income verification
• DTI calculations across all debt
• Credit score minimums
• Conventional underwriting

DSCR Blanket Loans:

• No personal income verification
• Aggregate rental income across all properties
• Combined DSCR calculation
• Portfolio-based qualification

Example DSCR Blanket Calculation:

Property A:

• Rent: $2,200/month
• Allocated Debt Service: $1,800/month

Property B:

• Rent: $1,900/month
• Allocated Debt Service: $1,650/month

Property C:

• Rent: $2,400/month
• Allocated Debt Service: $2,000/month

Combined:

• Total Rent: $6,500/month
• Total Debt Service: $5,450/month
• Portfolio DSCR: 1.19 ✓

Lender evaluates the aggregate cash flow, not individual property ratios.

When to Use a Blanket DSCR Loan

Scenario 1: Portfolio Refinance

Situation: You own 4-6 properties free and clear or with maturing loans.

Blanket Strategy:

• Consolidate into single blanket loan
• Pull cash out from equity
• Simplify to one payment
• Lock in long-term fixed rate

Benefits:

• Efficiency (one loan process vs. 4-6 separate)
• Potentially better rate (lender views as lower risk)
• Single payment to manage
• Deploy pulled equity into new acquisitions

Scenario 2: Bulk Purchase from Single Seller

Situation: Buying 3-8 properties from one seller (estate sale, retiring landlord, builder closeout).

Blanket Strategy:

• Single loan covering all properties
• One closing
• Negotiate package pricing
• Seller gets clean exit

Benefits:

• Faster closing
• Reduced transaction costs
• Leverage across portfolio
• May get better purchase price for bulk buy

Scenario 3: New Construction Development

Situation: Builder constructing 5-10 townhomes or small multifamily units.

Blanket Strategy:

• Blanket loan covers all units during construction
• Includes release clause for each unit
• Sell units individually, pay down loan pro-rata
• Release from blanket as each sells

Benefits:

• Single [construction loan](/blog/construction-loan-guide)
• Flexibility to sell or hold units
• Lower financing costs than individual loans

Scenario 4: Weak Individual Property Performance

Situation: You have 3 properties:

• Property A: DSCR 1.40 (strong)
• Property B: DSCR 0.95 (weak—won't qualify alone)
• Property C: DSCR 1.20 (acceptable)

Blanket Strategy:

• Combine all three under blanket DSCR loan
• Aggregate DSCR: 1.18 ✓
• Property B qualifies due to strong A and C

Caution: This ties strong properties to weak one—use carefully.

Key Components of [Blanket DSCR Loans](/blog/dscr-lenders-for-portfolio-investors)

1. Release Clause (Critical)

What It Is: Provision allowing you to remove individual properties from the blanket by paying down a specified amount.

Standard Release Clause Language: "Borrower may release individual property from collateral upon payment of 110-125% of that property's allocated loan amount."

Example:

• Blanket Loan: $1,000,000 across 5 properties
• Property A Allocated Amount: $200,000
• Release Requirement: $240,000 (120% of $200k)
• You pay $240k → Property A released from blanket

Why It Matters: Without a release clause, you must pay off the entire blanket loan to sell even one property.

Negotiation Tip: Push for release at 100-110% rather than 125%. Lower percentages give you more flexibility.

2. Allocated Loan Amounts

What It Is: Each property gets an assigned portion of the total loan, even though it's one mortgage.

Example Allocation:

Why Allocation Matters:

• Determines release amounts
• Clarifies equity in each property
• Facilitates partial paydowns
• Useful for future refinancing

Ensure Lender Documents This Clearly.

3. [Cross-Collateralization](/blog/blanket-mortgage-guide) and Cross-Default

Cross-Collateralization: All properties secure the entire debt. Default on the loan puts all properties at risk.

Cross-Default: Defaulting on one property's obligations (e.g., property taxes) can trigger default on entire blanket loan.

Example: You fail to pay property tax on Property B. Lender can:

• Declare entire blanket loan in default
• Foreclose on all properties (A, B, C, D)

This is the major risk of blanket mortgages.

4. Partial Release Schedule

What It Is: Pre-determined order and amounts for releasing properties.

Example Schedule:

• After $250k paid down → Release Property A
• After additional $220k paid down → Release Property B
• After additional $240k paid down → Release Property C
• Final property released upon full payoff

Benefits:

• Clear exit strategy
• Know exactly what's needed to release each property
• Plan sales/refinances accordingly

DSCR Blanket Loan Structure and Terms

Interest Rates

Compared to Individual DSCR Loans:

• Individual loans: 7.5-8.5% typical
• Blanket DSCR: 7.25-8.25% typical
• Potential savings: 0.25-0.50%

Why Sometimes Better:

• Lender has more collateral (lower risk)
• Larger loan size = better pricing
• Portfolio relationship value

Why Sometimes Same:

• Depends on lender
• Risk factors (property diversity, individual DSCRs)
• Market conditions

Loan-to-Value (LTV)

Typical Blanket DSCR LTV:

• 70-75% on aggregate value
• Same or slightly lower than individual loans

Example:

• Combined Property Value: $1,200,000
• Max Blanket Loan at 75% LTV: $900,000

Minimum Portfolio Size

Most Lenders Require:

• Minimum 2-3 properties
• Combined loan amount: $300k+ (varies)
• No maximum (some portfolios 20+ properties)

Sweet Spot: 3-10 properties for most blanket DSCR programs.

Down Payment (New Purchase)

Buying Multiple Properties:

• Typically 25-30% down on aggregate value
• Similar to individual DSCR requirements

Refinancing Owned Properties:

• Cash-out up to 75% of value
• Must meet aggregate DSCR requirements

Benefits of Blanket DSCR Mortgages

1. Simplified Management

One Loan Means:

• Single monthly payment
• One servicer contact
• One loan statement
• Simplified bookkeeping and tax reporting

vs. 5 Separate Loans:

• Tracking 5 payments, dates, balances
• 5 different servicers
• Coordination complexity

2. Cost Savings

Fewer Closing Costs:

• One appraisal (or reduced per-property cost)
• Single title insurance policy
• One set of legal fees
• One origination fee

Example: 5 Individual Loans:

• 5 appraisals @ $500: $2,500
• 5 title policies @ $1,200: $6,000
• 5 origination fees @ 1%: $50,000 (on $1M total)
• Total: $58,500+

Blanket Loan:

• 1 appraisal (multi-property): $2,000
• 1 title policy: $3,500
• 1 origination @ 1%: $10,000
• Total: $15,500

Savings: $43,000

3. Potentially Better Rates

As mentioned, blanket loans sometimes qualify for 0.25-0.50% rate reduction due to larger size and portfolio relationship.

4. Overcome Weak Individual Properties

Aggregate DSCR calculation allows strong properties to carry weaker ones, enabling financing that wouldn't work with individual loans.

5. Faster Deployment of Capital

One loan process, one closing vs. multiple sequential closings accelerates portfolio growth.

Risks and Disadvantages

Risk 1: All Properties at Stake

The Big One: Default on the loan puts ALL properties at risk of foreclosure, not just one.

Scenario: You have 6 properties in blanket loan. Economic downturn causes 2 properties to have extended vacancies. You struggle to make blanket payment and miss 3 months.

Result: Lender can foreclose on all 6 properties, even the 4 performing well.

Mitigation:

• Maintain significant reserves (12+ months PITIA)
• Ensure aggregate cash flow comfortably exceeds debt service
• Have backup plan (HELOC, business line of credit)

Risk 2: Reduced Flexibility

Can't Easily Sell Individual Properties: Without release clause, selling one property requires:

• Lender approval
• Often paying down more than that property's allocation
• Complexity in transactions

Impact on Strategy: Limits your ability to:

• Exit underperforming properties
• Take advantage of appreciation on one asset
• Rebalance portfolio

Mitigation: Always negotiate strong release clause (100-110% of allocated amount).

Risk 3: Difficult to Refinance Individual Properties

Locked In: You can't refinance one property without addressing entire blanket.

Scenario: Property A appreciates significantly, now has $200k equity. You want to pull cash out via refinance.

Problem: Must refinance entire blanket loan to access Property A's equity, affecting all properties.

Mitigation: Plan for periodic portfolio refinancing (every 3-5 years) rather than individual property refi.

Risk 4: Lender Concentration Risk

All Eggs, One Basket: Your entire portfolio is with one lender.

Risks:

• Lender changes policies
• Servicer transferred to unfriendly company
• Modification requests harder
• Relationship goes sour

Mitigation: Maintain relationship with multiple lenders, don't put every property in one blanket.

Risk 5: Complex Accounting and Taxes

Challenges:

• Allocating mortgage interest across properties for tax purposes
• Depreciation tracking per property
• Determining individual property ROI
• Complicated if properties in different LLCs

Solution: Work with CPA experienced in blanket mortgages.

Structuring a Favorable Blanket DSCR Loan

Negotiation Checklist

1. Strong Release Clause

• Target: 100-110% of allocated amount
• Written clearly in loan docs
• No lender approval required (automatic if conditions met)

2. Clear Allocation Schedule

• Each property assigned specific loan amount
• Documented in writing
• Proportional to value or strategic plan

3. Partial Release Rights

• Ability to release properties in any order (or specified order)
• No minimum portfolio size after releases (can go down to 1-2 properties)

4. Substitution Rights

• Ability to swap out property for another of equal/greater value
• Useful if you want to sell one and buy replacement

5. No Future Cross-Collateralization

• New properties you acquire NOT automatically added to blanket
• Prevents blanket from growing uncontrollably

6. Limited Cross-Default

• Cross-default limited to properties in blanket only
• Not triggered by other loans with lender

7. Prepayment Flexibility

• No prepayment penalty OR minimal penalty
• Can pay down principal without fees
• Facilitate releases and payoffs

Sample Release Clause Language

Investor-Friendly Version:

"Upon payment of One Hundred Ten Percent (110%) of the allocated principal balance for any individual property as shown in Exhibit A, Borrower may request release of said property from this mortgage. Lender shall execute release within 30 days of request, provided: (1) Borrower is not in default, (2) payment is received, and (3) remaining collateral maintains minimum 1.20 DSCR and 70% LTV. No lender approval or additional fees required."

What Makes It Good:

• Specific percentage (110%)
• Automatic (no discretionary lender approval)
• Clear timeframe (30 days)
• Objective remaining portfolio requirements
• No additional fees

Blanket Loan vs. Portfolio Loan vs. Multiple Individual Loans

Blanket Loan

Structure: Single loan, multiple collateral properties Payment: One monthly payment Flexibility: Moderate (with release clause) Risk: High (all properties at stake) Best For: Established portfolios, bulk purchases, simplification

Portfolio Loan

Structure: Often refers to loans held by lender (not sold to secondary market); can be individual loans or blanket Payment: Depends on structure Flexibility: Varies Risk: Depends on structure Best For: Non-conforming scenarios, lender relationship plays

Note: "Portfolio loan" and "blanket loan" are not synonyms—portfolio describes who holds the loan; blanket describes collateral structure.

Multiple Individual Loans

Structure: Each property = separate loan Payment: Multiple payments Flexibility: Maximum Risk: Isolated per property Best For: Investors valuing flexibility, diverse portfolio, varied strategies per property

Comparison Table

Real-World Case Study: 5-Property Blanket DSCR

Investor Profile:

• Owns 5 single-family rentals
• Purchased individually over 5 years
• Current loans maturing, want to consolidate

Properties:

Total Portfolio:

• Combined Value: $1,470,000
• Current Debt: $630,000
• Total Rent: $11,500/month

Blanket [DSCR Refinance Strategy](/blog/dscr-loan-brrrr-strategy):

New Blanket Loan:

• Amount: $1,102,500 (75% LTV)
• Rate: 7.75% (30-year fixed)
• Monthly P&I: $7,900
• Taxes + Insurance: $2,600/month
• Total PITIA: $10,500/month

DSCR Calculation:

• Rental Income: $11,500
• Debt Service: $10,500
• DSCR: 1.10 ✓ (meets lender minimum)

Cash Out:

• New Loan: $1,102,500
• Payoff Existing: $630,000
• Cash to Investor: $472,500 (before closing costs)

Closing Costs:

• Appraisal (5 properties): $2,500
• Title insurance: $4,200
• Origination (1%): $11,025
• Legal/misc: $3,000
• Total: $20,725

Net Cash Out: $451,775

Terms Negotiated:

• Release clause at 115% of allocated amount
• No prepayment penalty after year 3
• Allocated amounts documented per property

Result:

• Simplified to one payment
• Pulled $450k+ to deploy in new acquisitions
• Locked 30-year fixed rate
• Maintained flexibility with release clause

12-Month Cash Flow:

• Rent: $11,500
• PITIA: $10,500
• PM/Maintenance/Vacancy (20%): $2,300
• Net Cash Flow: -$1,300/month

Why Still Smart:

• $450k deployed into 2 new properties generating $1,800/month cash flow
• Combined portfolio now cash flows $500/month
• Built equity through principal paydown
• Simplified management significantly

Frequently Asked Questions

What's the difference between a blanket mortgage and cross-collateralization?

A blanket mortgage is a specific loan structure where one loan is secured by multiple properties. Cross-collateralization is a broader concept where multiple properties secure one or more loans. All blanket mortgages involve cross-collateralization, but not all cross-collateralized loans are blanket mortgages (e.g., two separate loans both secured by the same two properties).

Can I sell one property if it's in a blanket mortgage?

Only with a release clause. A release clause allows you to remove individual properties from the blanket by paying down a specified amount (typically 100-125% of that property's allocated loan balance). Without a release clause, you'd need to pay off the entire blanket loan or get lender permission—which they may deny or charge heavily for.

How do DSCR lenders calculate the ratio for blanket loans?

They aggregate all rental income from the properties and divide by the total debt service (PITIA) for the blanket loan. For example, if 4 properties generate $8,000/month combined rent and the blanket loan PITIA is $6,500/month, the DSCR is 1.23. Individual property ratios don't matter—only the portfolio aggregate.

What happens if I default on a blanket DSCR loan?

The lender can foreclose on ALL properties securing the blanket mortgage, even if only one property is causing the issue. This is the primary risk. If you have 5 properties in a blanket and miss payments, all 5 are at risk. Maintain substantial reserves and ensure comfortable aggregate cash flow.

Are blanket mortgages cheaper than individual DSCR loans?

Potentially. You'll save on closing costs (one set of fees vs. multiple) and may get a 0.25-0.50% rate discount due to larger loan size and portfolio relationship. However, rates depend on lender, property quality, and DSCR strength. The cost savings are often more about efficiency than rate.

Can I add properties to an existing blanket mortgage later?

Only if the loan agreement specifically allows it, which is rare. Most blanket mortgages are fixed in terms of which properties are included. You'd typically need to refinance the entire blanket to add properties. Negotiate "substitution rights" if you want flexibility to swap properties in and out.

Do I need a release clause in my blanket mortgage?

Yes, absolutely essential unless you plan to hold all properties until the loan is fully paid off and never sell individually. Without a release clause, you cannot sell or refinance individual properties without paying off the entire blanket loan. Always negotiate this before closing.

Can I get a blanket DSCR loan with properties in different states?

Yes, though it's more complex. Each state requires a separate mortgage/deed of trust filed in that state's county records, all securing the same promissory note. Lenders experienced with multi-state portfolios handle this routinely. Expect slightly higher legal costs for multi-state documentation.

What's the minimum number of properties needed for a blanket mortgage?

Most lenders require at least 2-3 properties. Single-property loans aren't "blanket" mortgages by definition. The maximum varies widely—some lenders handle portfolios of 20+ properties, while others cap at 10. There's no regulatory limit, only lender-specific policies.

Should I use a blanket mortgage or keep properties in separate loans?

Choose blanket if: you want simplification, long-term hold strategy, portfolio refinance efficiency, and you're comfortable with the risks. Choose individual loans if: you value flexibility, plan to sell properties independently, want isolated risk, or actively manage/trade properties. Many investors use a hybrid—blanket for core holdings, individual loans for opportunistic purchases.

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Blanket mortgages combined with DSCR qualification create powerful portfolio financing opportunities—simplifying management and potentially reducing costs. But the strategy demands careful structuring with strong release clauses and understanding of the risks. When used correctly for stable, long-term portfolios, blanket DSCR loans can accelerate wealth building while maintaining operational efficiency.

Related Articles

• Credit Score Requirements for DSCR Loans
• Credit Score Requirements for DSCR Loans
• [[DSCR Loan Down Payment](/blog/dscr-loan-down-payment-requirements): How Much Do You Really Need?](/blog/dscr-loan-down-payment-requirements)