Structuring a Wraparound mortgage

[Kingsley Ogwuegbu]

Hey All,

I am purchasing a friends property in Cleveland, OH with a wraparound mortgage (my first time doing this) and I was wondering if anyone can refer a lawyer/title company that can assist with this please.

Also please feel free to share ang tips and pitfalls to look out for.

Thank you!!!

[Marco Bario]

Congrats on the purchase @Kingsley Ogwuegbu! A few tips:

1. Make sure your friend sends an authorization to the underlying mortgage servicer allowing them to share account information with you in perpetuity. You'll want to be able to obtain balances, confirm payments were received, obtain payoff statements, etc.
2. Ask your friend to share the username and password for the servicer's website
3. I recommend using a loan servicer to collect your payments and disperse payments each month to the underlying mortgage servicer. It makes life much easier for all parties. 
4. Your friend may be able to claim interest paid on the underlying loan as a business expense. Be sure you and your friend are receiving annual forms 1098 associated with both loans and that you discuss with your respective tax advisors.
5. You will purchase hazard insurance in your name, listing the underlying lienholder as 1st loss payee and your friend as 2nd loss payee.
6. When structuring a wrap, it's best for the wrap term to be longer than the term for the underlying loan and of course the monthly P&I payment to be higher. 
7. The promissory note will be a "wrap note" and the mortgage a "wrap mortgage." Both state that they are subject to the underlying lien and both disclose its existence.