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
Interest that is earned but not paid, adding to the amount owed. For example, if the monthly interest due on a loan is $600 and the borrower pays only $500, $100 is added to the amount owed ...
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Employees of lenders or mortgage brokers who find borrowers, sell and counsel them, and take applications. Loan officers employed by mortgage brokers may also be involved in loan ...
Assuming responsibility for someone else's payment obligation in the event that that party defaults. ...
On an ARM, the assumption that the value of the index to which the interest rate is tied does not change from its initial level. ...
A borrower with the best credit rating, deserving of the lowest prices that lenders offer. ...
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