Multiple properties under one mortgage?

[Jorge Rivera]

I like to get people's opinions. I'm curious to know if it's a good idea to have multiple properties under one mortgage? What would be the pros?(If any) and cons?..... Thank you in advance. 

[Roy N.]

@Jorge Rivera

In certain situations you will have little choice but to have multiple buildings under one mortgage (they may be on the same lot).  One of the opportunities we are evaluating at the moment has five buildings (18 units) on one ~3acre lot - financing would be a commercial mortgage covering the entire site.

Other times you may wish to have a blanket or portfolio mortgage spread over several properties - though up here (Canada) they are difficult to arrange these days (I do not think any lenders are going to offer them on residential properties).

The biggest advantage (IMHO) of a blanket or portfolio mortgage is that you have the equity of several properties securing the note. While some properties in the portfolio may be fully leveraged (80% LTV), the entire portfolio will most probably be leveraged at a lower LTV ration (i.e. 65%). It may (or may not) be possible to add and remove properties from the portfolio.

The biggest disadvantage would occur if you wanted to divest of one of the properties under the portfolio mortgage. It may, or may not, be possible depending on the terms of the mortgage and the remaining LTV ratio of the portfolio with that property removed. In cases where it is possible to remove a property, there may be additional costs and penalties associated with the transaction.

The few portfolio mortgages I have seen have all been quite unique in their terms and structure, so I would caution against trying to draw too many generalisations.