Which option is the best route business-wise is a complex decision.

I've heard of "blanket mortgages" which I thought might be a better option for me so I could use the equity in both properties and only need to get one mortgage.

Either of those would be much better option then a blanket loan to (as mentioned above) the issue with partial release. 

Good option for getting money for further investing?

I think other options can get you places much faster. 

Call your banks and ask them if they offer any options and try to work with them.Another option is to sell one of your property, consolidate and move on...

I don't know what options to look into but if you point me in the right direction to research I will.

The other two options require spending money that is basically going out the door to lots of fees and expenses of exiting your current house and getting into a new one.If you were just looking to move, that is perhaps a different story… If your house isn’t working for you, for instance.

To your question about the two different options, I think you could likely do both of your scenarios based on the capital amount you have. 

May be beneficial to join prop radar and refine search options to search this way.