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?

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.

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...

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

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. 

The best option is to proceed with a cash-out refinance utilizing a DSCR loan. you can grab up to 75%LTV all by using the current tenant's lease agreements to cover the debt service requirement.

If you like single family investing, you will have a lot of solid options there.