A wraparound mortgage allows a home seller to extend financing to the buyer by providing a new mortgage that “wraps around” the existing one. This approach is typically used when the original mortgage is assumable, meaning the buyer can take over the seller’s loan under the same conditions. In some cases, with the lender’s permission, it can also be applied to non-assumable loans. The wraparound mortgage includes the remaining balance of the original loan plus any additional funds the buyer borrows. The buyer makes a single payment to the seller, who then uses a portion of that payment to cover the original mortgage. Generally, the wraparound mortgage carries a higher interest rate, which can be appealing to sellers looking to maximize their returns. However, if the original mortgage is non-assumable, lender approval is crucial; otherwise, the lender may demand full repayment, putting the entire arrangement at risk.
Discussion about this post
No posts