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
A documentation requirement where the applicant's income is not disclosed. ...
A particular combination of loan, borrower, property, and transaction characteristics that lenders use in setting prices and underwriting requirements. ...
The specific interest rate series to which the interest rate on an ARM is tied, such as 'Treasury Constant Maturities, One-Year,' or 'Eleventh District Cost of Funds.' ...
The period until the last payment is due. The maturity is usually but not always the same as the period used to calculate the mortgage payment. ...
A home built entirely in a factory, transported to a site, and installed there. Manufactured homes are distinguished from 'modular,' 'panelized'' and 'pre-cut' homes. Manufactured houses ...
Authorization by the lender for the borrower to pay taxes and insurance directly. This is in contrast to the standard procedure, where the lender adds a charge to the monthly mortgage ...
The dollar amount of interest paid each month. The interest payment is the same as interest due so long as the scheduled mortgage payment is equal to or greater than the interest due. ...
The array of laws and regulations dictating the information that must be disclosed to mortgage borrowers, and the method and timing of disclosure. ...
An upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount; e.g., '3 points' means a charge equal to 3% of the loan ...
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