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
Mortgages delivered using the Internet as a major part of the communication process between the borrower and the lender. ...
The interest rate adjusted for intra-year compounding. Because interest on a mortgage is calculated monthly, a 6% mortgage actually has a rate of .5% per month. If there were no principal ...
A letter from a lender verifying that the price and other terms of a loan have been locked. Borrowers who lock through a mortgage broker should always demand to see the lock commitment ...
A non-citizen with a green card employed in the U.S. Non-permanent resident aliens are subject to somewhat more restrictive qualification requirements than U.S. citizens. Permanent ...
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Fees collected by a loan officer from a borrower that are lower than the target fees specified by the lender or mortgage broker who employs the loan officer. An underage is the opposite ...
A charge imposed by the lender if the borrower pays off the loan early. The charge is usually expressed as a percent of the loan balance at the time of prepayment or a specified number of ...
A lender who delivers loans to another (usually larger) lender against prior price commitments the larger lender has made to the correspondent. Mortgage brokers sometimes evolve into ...
A borrower who submits applications through two loan providers, usually mortgage brokers, without their knowledge. Home purchasers sometimes submit more than one loan application as a way ...
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