Land records · Parcel maps · October 7, 2026
What Is a Wraparound Mortgage? Risks and Records
What is a wraparound mortgage? Seller financing that wraps around the seller's existing loan, so the buyer pays the seller who keeps paying the lender.
What is a wraparound mortgage? A wraparound mortgage, or wrap, is a form of seller financing in which the seller sells the property but leaves their existing mortgage in place. The buyer signs a new note and mortgage to the seller for a larger amount that “wraps around” the existing loan. The buyer makes payments to the seller, and the seller continues paying the original lender. The seller profits from the difference in interest rates and balances. Wraps can help buyers who cannot qualify for a conventional loan, but they carry significant legal and practical risks. This page is general land-records background, not legal advice.
How a wrap works
| Item | Example |
|---|---|
| Sale price | $300,000 |
| Buyer’s down payment | $30,000 |
| Wrap note to seller | $270,000 at 7% |
| Seller’s existing loan | $180,000 at 4% |
| Seller’s spread | Difference between payments received and paid |
The buyer gets title by deed, subject to the existing mortgage, and the seller’s wrap mortgage is recorded behind it.
The due-on-sale problem
Most mortgages contain a due-on-sale clause letting the lender demand full payment when the property is transferred. A wrap usually triggers that right. If the lender calls the loan, the seller must pay it off or face foreclosure, which could wipe out the buyer’s interest.
Risks for buyers
- The seller might stop paying the underlying loan.
- Liens or judgments against the seller could affect the property.
- The original lender could foreclose.
- Payment records may be poorly kept.
Buyers often use a third-party servicer to collect payments and pay the underlying loan directly.
Risks for sellers
- The seller stays liable on the original loan.
- The buyer might stop paying.
- Foreclosing on the buyer takes time and money.
- Consumer lending laws may apply to seller financing.
Wrap vs land contract vs purchase money mortgage
A land contract keeps title in the seller until paid. A standard purchase money mortgage is usually made when there is no existing loan or it is paid off. A wrap transfers title but leaves the old loan in place.
Title and priority
The original mortgage stays senior. The wrap mortgage is junior. See what is lien priority. Title insurance for the buyer will list the existing loan as an exception.
Documentation
Wraps should include a written agreement covering who pays taxes and insurance, what happens if the underlying lender calls the loan, and payment servicing. Recording the deed and wrap mortgage protects both parties’ interests.
Questions before entering a wrap
Both sides should know the balance, rate, and payment history of the underlying loan, whether the lender has been asked for consent, who will service payments, how taxes and insurance escrows will be handled, and what happens if the underlying loan is called. A written plan for paying off or refinancing the underlying loan by a set date reduces risk for everyone.
Bottom line
A wraparound mortgage lets a seller finance a sale while keeping their existing loan in place, with the buyer paying the seller. It can help buyers qualify but risks a due-on-sale demand, missed underlying payments, and complex defaults. Use careful documentation and servicing. Find county recorders via the Platbookmapper map.
What is a wraparound mortgage FAQ
What is a wraparound mortgage?
Seller financing that wraps around the seller’s existing mortgage.
Is a wraparound mortgage legal?
Generally, but it may violate the original loan’s due-on-sale clause.
Who pays the original lender?
The seller, usually from the buyer’s payments.
What if the seller stops paying the original loan?
The lender could foreclose, affecting the buyer.
Does the buyer get title?
Yes, usually subject to the existing mortgage.