Definitions for "Wraparound Mortgage"
A junior mortgage taken back by the seller for the amount of the property's purchase price less the buyer's down payment. The existing loan is retained and combined with a new, larger loan and the interest rate is set somewhere between the old rate and the current market rate. A typical wraparound is an interest-only loan with a 5-year balloon or less.
The addition of a new loan to the already existing loan.
A second mortgage that takes over the first. The first mortgage loan is not paid off. Instead, the borrower makes payments to the second mortgage lender for the debt service of both the first and second liens. The second lien holder then makes the payments to the first lien holder. This type of mortgage is used when the borrower is unwilling or unable to refinance the first mortgage. Prepayment of the first mortgage may be prohibited or may be subject to high penalties. Alternatively, the first mortgage may have a very attractive fixed rate of interest. The wraparound arrangement permits the borrower to leave the first mortgage intact while giving more control to the lender willing to make the second mortgage.
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a term sometimes associated with vendor financing and is sometimes used to described an instalment contract