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.

For instance:

  1. Current Home Value: $250,000
  2. Current Mortgage Balance $200,000

The seller could sell the home for $250,000, receive a down payment from the buyer for $20,000, and create a new mortgage in the amount of $230,000. The $230,000 mortgage would “wrap-around” the existing $200,000 mortgage.  The buyer would make payments directly to the seller for their newly-created $230,000 mortgage.  The seller would continue to make payments on the existing $200,000 mortgage.

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 where it has proven to be difficult to find buyers who can get conventional financing.

Some of the advantages of a wrap around mortgage are…

  1. Higher asking price
  2. Little to no closing costs
  3. Typically no realtor commissions
  4. Can improve the sellers credit
  5. Faster home sale
  6. Market to a larger pool of buyers

The main disadvantage to a wrap around mortgage 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.