wraparound mortgage


Wraparound mortgage

A second mortgage that leaves the original mortgage in force. The wraparound mortgage is held by the lending institution as security for the total mortgage debt. The borrower makes payments on both loans to the wraparound lender, which in turn makes payments on the original senior mortgage.

Wraparound Mortgage

A second mortgage that a borrower takes out to guarantee payment on the original mortgage. In this situation, the borrower makes payments on both mortgages to the wraparound lender, which then makes payments on the original mortgage to the original lender.

wraparound mortgage

A largely extinct financing tool involving a seller leaving its first mortgage in place while selling the property to another and holding the financing. The new mortgage “wrapped around” the old mortgage, so that the buyer made payments to the seller, who then deducted enough to make payments to the original mortgage lender.The practice has been rendered obsolete by the widespread use of the due-on-sale clauses in mortgage loans, making the entire principal balance of the loan due when the property is sold,whether or not there has been a default.There are a few circumstances when a due-on-sale clause is not enforceable (see that entry for details), providing an opportunity for wraparound mortgages.