Florida Real Estate Sales Associate Examination Content OutlineReal Estate FinanceHard
A developer is planning to build a new subdivision and needs financing that will cover the purchase of several large parcels of land, providing for the release of individual lots as they are sold. Which type of mortgage would be most suitable for this situation?
- ABridge Loan
- BConstruction Loan
- COpen-End Mortgage
- DBlanket Mortgage
Show answer & explanationAnswer & explanation
Correct answer: D. Blanket Mortgage
A blanket mortgage covers multiple parcels of land (the entire subdivision) and typically includes a "partial release clause" that allows individual lots to be sold and released from the mortgage lien upon payment of a specified amount, without triggering a full default on the remaining land.
Why the other options are wrong
- A. A bridge loan is short-term financing to bridge the gap between selling one property and buying another, not for developing multiple parcels.
- B. A construction loan funds the building of structures, not the purchase and release of multiple land parcels.
- C. An open-end mortgage allows for additional funds to be borrowed under the same mortgage, not for releasing parcels.
Blanket Mortgage
A single mortgage that covers more than one parcel of real estate, often used by developers to finance a subdivision.
- Covers multiple properties
- Includes a partial release clause
- Common in subdivision development
Memory trick: Blanket: Covers the 'whole blanket' of land, but lets you 'uncover' pieces.