Seller-financing structure where a new obligation wraps around an existing underlying mortgage.
A wraparound mortgage is a seller-financing structure where the buyer’s new obligation to the seller wraps around an existing underlying mortgage on the property.
Wraparound mortgage matters because the structure can be risky and document-sensitive. The buyer may be paying the seller while the seller remains responsible for an older loan, so the parties must understand how payments, liens, and the existing mortgage interact.
The term also matters because an existing loan may contain a Due-on-Sale Clause. A wraparound structure should not be assumed safe or allowed without proper review.
Borrowers encounter wraparound mortgage discussions during seller-financing negotiations, especially when the seller already has a mortgage and proposes to carry new financing for the buyer.
The term becomes important during title and closing review because the parties need to understand lien position, existing-loan restrictions, payment routing, default risk, and recording.
| Term | Main idea |
|---|---|
| Seller Financing | Seller extends credit to the buyer |
| Wraparound mortgage | Seller financing wraps around an existing underlying mortgage |
| Purchase-Money Mortgage | Financing connected to the buyer’s purchase of the property |
A seller still owes money on an existing mortgage but agrees to sell the home and accept payments from the buyer under a new note. The new arrangement wraps around the older loan, creating a wraparound mortgage structure.
Wraparound mortgage differs from Seller Financing because it is a specific seller-financing structure involving an existing underlying mortgage.
It also differs from Loan Assumption because an assumption involves taking over an existing loan under permitted terms, while a wraparound creates a new seller-held obligation around an existing loan.