Wraparound mortgage
A seller-financing setup where the seller keeps their original mortgage in place and gives the buyer a new, larger loan that wraps around it. Risky for both sides if the underlying loan has a due-on-sale clause.
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Free to set up. No credit card.Part 1 of 4
Why a seller cares
A wraparound keeps your mortgage in place while the buyer pays you on a bigger one. Your lender's due-on-sale clause can make the whole thing come due, which is why it is rare and risky on both sides.
Part 2 of 4
A simple example
Your loan has $150,000 at 3.5%. A buyer proposes a $220,000 wraparound at 6%: they pay you, you keep paying your lender, and you keep the spread.
| What happens | What follows |
|---|---|
| Both sides pay every month | You collect the difference between the two rates |
| Your lender notices the transfer | The due-on-sale clause lets them call the $150,000 |
| You miss a payment on the underlying loan | The buyer's home is at risk for your default |
A wraparound stacks a new loan on an old one, and the old lender did not agree to it.
Part 3 of 4
What people get wrong
That it is a clever way to share a low rate. It is a way to share a low rate the lender can take away at any time.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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