Florida Real Estate Broker ExaminationReal Estate Finance and InvestmentMedium
A Florida developer is seeking financing for a new residential subdivision that will involve the construction of multiple homes on several individual lots. Which type of mortgage loan is specifically designed to cover more than one parcel of real estate and typically includes a partial release clause?
- AWraparound mortgage
- BBlanket mortgage
- CPackage mortgage
- DOpen-end mortgage
Show answer & explanationAnswer & explanation
Correct answer: B. Blanket mortgage
A blanket mortgage covers more than one parcel of real estate and is commonly used by developers. It typically includes a partial release clause, allowing individual lots to be sold off as homes are completed without requiring the entire mortgage to be paid.
Why the other options are wrong
- A. A wraparound mortgage is a junior loan that encompasses an existing senior loan, used for refinancing, not for developing multiple lots.
- C. A package mortgage includes both real and personal property (e.g., furniture in a furnished condo), not multiple parcels of land.
- D. An open-end mortgage allows the borrower to increase the principal balance of the loan at later times, not for multiple parcels.
Blanket Mortgage
A blanket mortgage is a single mortgage loan that covers multiple parcels of real estate, often used by developers for subdivisions, and typically includes a partial release clause.
- Covers multiple properties under one loan.
- Common in subdivision development.
- Partial release clause allows individual properties to be sold.
Memory trick: A 'Blanket' covers many 'Lots'.