finance
wraparound mortgage
A wraparound mortgage is a form of seller financing in which the seller gives the buyer a new, larger loan that "wraps around" the seller's existing mortgage. The buyer pays the seller on the new loan, and the seller continues paying the original lender, often profiting from a higher interest rate on the wrap. The existing loan stays in place, so a due-on-sale clause in the original loan can create problems.
- Exam tip
- A wraparound is junior financing that includes the existing loan's balance. Watch for due-on-sale or alienation clauses that can block it.
- Example
- A seller owes $150,000 at 4% and sells for $250,000 with $25,000 down, giving the buyer a $225,000 wrap at 7% and keeping the spread.
Related terms & state variants
Sources
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Last verified: 2026-10-23