Wrap Around Mortgage Question.

[Shaun Skeffington]

Hi BP...Can someone explain what a wrap around mortgage is and how one can benefit from it? Thanks!

[Rich Hupper]

The wrap is used by a homeowner who has an existing mortgage ( the senior lien ) on their property to sell their home to a new buyer while keeping their current mortgage intact. The seller finances the purchase price less the down payment received from the buyer thus creating a junior lien on the property. The buyer pays the seller monthly payments in which the seller then pays his mortgage ( the senior lien ).  

This is similar to the purchase money mortgage in which the seller helps a buyer with a down payment by creating a junior lien secondary to the buyers senior lien they are using fund most of the property. 

The wrap may interfere with the senior mortgage due on sale clause. 

The purchase money mortgage may interfere with the buyers qualifying ratios with their lender who is funding most of the purchase price. 

I have never seen either of these executed in a real deal in today's market however I am still a novice, and in a market where people have plenty of money or purchasing power where they would not need to be creative.