A general mortgage is a type of mortgage that does not rely on a single asset to serve as collateral for the loan. With a mortgage of this kind, the debt is secured with the use of multiple assets. Also known as a blanket mortgage, the range of assets will vary, depending on the regulations that apply in the country where the mortgage is written. Along with real estate, assets such as boats, jewelry, or stocks and bonds may serve as the collective collateral for the loan.
One of the benefits of a general mortgage is that an investor can use a single mortgage to obtain funds to purchase multiple parcels of real estate. By using all the purchased properties as the security on the mortgage loan, it is possible to avoid incurring multiple closing costs and loan fees. This approach means that the debtor has less to repay over the life of the loan, and does not have to keep up with multiple mortgage payments on the various properties.
Along with the advantages, there is also some increased risk to the lender. In many countries, a general mortgage does not have the same standing in a bankruptcy or other type of asset liquidation that standard mortgages enjoy. This means the lender holding the general mortgage will often have to wait until other claims such as taxes and the single mortgages and have been addressed and resolved before receiving any type of payment. Many lenders that do extend blanket mortgages are aware of this fact, and sometimes adjust the interest rate upward to help offset the higher degree of risk involved.
In just about every situation, a borrower can make use of several eligible properties to obtain the general mortgage. Both commercial and residential properties are usually considered eligible, assuming the properties are not currently being used as collateral on another mortgage. Depending on the amount of equity in a particular piece of property, the lender may consider the holding eligible for inclusion, even with a pre-existing mortgage.
Under certain circumstances, a lender may accept assets other than real estate as collateral on a general mortgage. If the property is owned in full by the borrower, has a market value that shows excellent promise of either retaining its present worth or appreciating in value, and can be easily sold if necessary, there is a good chance that the lender will determine that the asset is eligible for use as collateral. Before assuming that assets other than real estate can be used to secure a general mortgage, talk with the lender and find out if he or she is willing to accept other types of property as security for the loan.
