A wrap around mortgage is another type of owner financing that is ideal when you have an underlying mortgage along with some equity. The seller simply creates a brand new mortgage and it just “wraps around” the existing mortgage.
Current Home Value: $250,000
Current Mortgage Balance $200,000
If the seller sold the home for $250,000 with a loan of $230,000, the wrap-around mortgage breakdown would be the underlying lien of $200,000 and a second lien from the seller of $30,000.
This is another great method of selling a home in a market where a seller does not want to lose their hard-earned equity and it has proven to be difficult to find buyers who can get conventional financing.
Some of the advantages of a wrap around mortgage are…
- Higher asking price
- Little to no closing costs
- Typically no realtor commissions
- Can improve the sellers credit
- Faster home sale
- Market to a larger pool of buyers
The main disadvantage to a mortgage assignment is…
- If the buyer stops making payments, the seller will get the house back by either a foreclosure or a deed-in-lieu.
We may be interested in buying your home using this method or perhaps helping you broker the deal to another buyer.