Wrap Around Mortgage
Hi,
I just read an interesting article on wrap-around mortgages. Unfortuanately it was short on details. The idea is that you finance the house with low interest then mark-up the sales price and sell on a landcontract at a higher interest rate and hold the note. The author said that you could then sell the note if you liked.
Can anyone tell me what kinds of documents are needed to do something like this outside the a sales contract? When selling the note for the land contract, wouldn't my name still be attached to the original loan? Any other down-falls that just aren't obvious?
Thanks. - Chad
Chad,
What sort of process do you use to close a transaction (Lawyer or escrow officer at title company)?
You get the idea of the wrap just fine. You are creating a note for the amount agreed. You have to disclose that the title has a prior note on it. It will show up on the title report when the buyer reviews the title.
As to selling the wrap. You would be selling your interest. You are selling a second in effect. The buyer is really interested in buying the cash flow and the underlying first does reduce this.
As you are effectively selling a second it will not be easy to sell and will be heavily discounted. Hence it will likely be better to just collect your monthly payments. Not the best idea if you need to get the profits out for another deal.
Yes, you would still be on the first and that would have an impact on your ability to obtain future financing (expense and liability). You would also have the income from the wrap to help offset.
John
[addsig]
Thanks for the reply. I thought it sounded a little too good to be true. It may work in some cases but at the moment I am better off with my current strategy of lease / optioning. Thanks again!