Florida Real Estate Broker ExaminationReal Estate Finance and InvestmentMedium
A Florida real estate developer is seeking financing for a new residential subdivision. This type of loan covers the costs of land acquisition, site development, and construction of multiple homes before they are sold. Which type of financing is most suitable?
- APackage mortgage
- BBridge loan
- CConstruction loan
- DBlanket mortgage
Show answer & explanationAnswer & explanation
Correct answer: D. Blanket mortgage
A blanket mortgage covers more than one parcel of real estate, which is ideal for developers who need to finance an entire subdivision or multiple lots under a single loan. A construction loan finances the building process but doesn't inherently cover multiple parcels unless structured specifically.
Why the other options are wrong
- A. A package mortgage includes both real and personal property in the loan.
- B. A bridge loan is a short-term loan used to 'bridge' the gap between two transactions.
- C. A construction loan finances the building of a single property or project, but not typically multiple separate parcels under one loan without a blanket provision.
Blanket Mortgage
A type of mortgage that covers more than one parcel of real estate, often used by developers to finance subdivisions.
- Typically includes a 'partial release clause' allowing individual lots to be sold.
- Commonly used in new development projects.
- Allows a single loan to secure multiple properties.
Memory trick: Blanket: Covers ALL the land, like a big warm quilt.