What Is a Wrap Around Mortgage?

Sitting in front of a would be seller is when we realized that some of the terms commonly used in the real estate what is a wrap around mortgageindustry are not so common in every day life for every one else. We have been speaking to a seller about buying a house on a wrap and then would be abruptly interrupted with the question “what is a wrap around mortgage”. Since it is such a common question we hear from sellers I want to answer it here.

What is a Wrap Around Mortgage?

Also known as a wrap, also referred as seller or owner financing. The wrap around mortgage is simply extending a junior lien to a buyer by wrapping a new lien around the current one that you have with your lender. So essentially you have the ability to play the bank even if you still have a mortgage of your own.

The lien is secured by a promissory note no different than the one you have with your lender. The process is simple really, your buyer pays you and then you pay the bank. Whatever s leftover is yours to keep. So if your mortgage has an interest rate of 4% and you create a wrap for your buyer at 6% you will pocket the 2% difference every month.

Why Sell On A Wrap?

One of the most common reasons to sell your house on a wrap is being over leveraged or close to it with your mortgage. We have purchased homes from sellers who needed to sell quickly that could not afford to pay a Realtor fee, nor wait for the house to sell on the market. On top of all that, they had to move for a job and in no way could afford two mortgages. We gladly relieved them of that monthly debt and they were able to show their mortgage brokers the proof of it.

So not only were they able to get rid of the monthly payment, but they were also able to show income where the mortgage once was. That’s why we love buying on a wrap, it’s a win win all around. We are able to acquire a new property without needing to go to the bank for the loan and the seller is able to quickly sell when a cash deal just won’t make sense.

If you any questions on selling your own and if you think this strategy sounds like it will make sense for you, feel free to contact us with any questions today!