Wrap-Around Mortgage

If you can wrap a mortgage around yourself, it doesn’t mean you're skinny or particularly shallow (ask Gaga if you're wondering). It just means your mortgage is really big.

Lettuce explain.

A wrap-around mortgage is kind of a “second” mortgage on top of your first mortgage. It wraps around it. This wrap-around loan will override the OG loan, giving you more cash to cover the price for buying a house. This is known as “secondary financing,” since a normal ol' mortgage (primary financing) just didn’t cut it.

While a wrap-around loan sometimes will be given out by a bank, more often banks say “nah, bro, too risky” That’s why wrap-around loans are more common with direct buyer-seller transactions.

Here’s how it works: the buyer owes the seller, and the seller pays the mortgage. Usually, this wrap-around loan comes at a higher interest rate than the first one, which makes sense, since it does appear riskier.

By the way, this is called “seller financing” when the seller plays a role in the financing like this, which isn’t common, but it does happen (obviously).