Wrap-Around Mortgage
Definition of "Wrap-Around Mortgage"
A mortgage loan transaction in which the lender assumes responsibility for an existing mortgage. A wrap-around can be attractive to home sellers because they may be able to sell their home for a higher price. In addition, if the current market interest rate is above the rate on the existing mortgage, the seller can earn an attractive return on the cash foregone from the sale. For instance, if the $70,000 mortgage in the example has a rate of 6% and the new mortgage for $95,000 has a rate of 8%, S earns 8% on his $25,000 investment plus the difference between 8% and 6% on $70,000. The total return is about 13.5%. Only assumable loans are legally able to be wrapped. Assumable loans are those on which existing borrowers can transfer their obligations to qualified house purchasers. Today, only FHA and VA loans are assumable without the permission of the lender. Other fixed-rate loans carry 'due on sale' clauses, which require that the mortgage be repaid in full if the property is sold.
Popular Mortgage Terms
The period over which the interest due the lender is calculated. The interest accrual period may or may not correspond to the payment period. On the annual accrual mortgages in the UK, ...
An option attached to a mortgage, which allows the borrower to pay only the interest for some period. A mortgage is 'interest only' if the monthly mortgage payment does not include any ...
The highest rate possible under an ARM contract; same as 'lifetime cap.' It is often expressed as a specified number of percentage points above the initial interest rate. ...
A lender that provides loans through mortgage brokers or correspondents. ...
The payment of principal and interest made by the borrower. ...
The maximum allowable ratio of loan-to- value (LTV) on any loan program. Generally, these are set by mortgage insurers or by lenders and can range up to 100%, although some programs will ...
If you’re a student in medical school, a resident or a medically qualified doctor, you must know the definition of Physicians Mortgage Loan, also known as Doctor Loans. Why? Because, ...
The period over which the borrower is obliged to make payments. On most mortgages, the payment period is a month but on some it is biweekly. It is not necessarily the same as the Interest ...
A mortgage that can be moved from one property to another. Ordinarily, you repay your mortgage when you sell your house and take out a new mortgage on the new home you purchase. With a ...
Have a question or comment?
We're here to help.