WrapAround HUH?
Can someone explain what a wraparound mortgage exactly is? I am interested in a Duplex owner occupied, and I am trying to learn the different ways and options to present to the seller. Hibby mentioned a sub to with a wraparound in this situation...(aka All Inclusive Trust Deed aka AITD). ??
I just was interested in a couple explanations. Thanks in advance.... [ Edited by sKauGhTiEe on Date 03/19/2004 ]
sK........(I can't type your name, forgot the spelling from previous page, sorry
Anyway......
Here is a defintion of a "Wrap around mortgage"
Wrap Around Mortgage:
(Also called the all-inclusive mortgage or all inclusive trust
deed.) The wrap-around mortgage is a purchase money mortgage which is subordinate to, but yet includes the encumbrance or encumbrances to which it is subordinated.
Basically, it works like this.
A property owner has a house with a loan on it for say $60k, at 7%.
They in turn sell to you, carrying paper, for $90k, 10%.
The seller wraps the underlying financing under yours.
This way, as you pay them, the older loan underneath gets paid down faster, since it is older, and the seller keeps the spread.
A nice way to sell, sometimes.
A Contract for deed, land contract, agreement for deed, bond for deed etc. are all informal wrap type transactions, with one main difference........title remains in the sellers name, until the buyer satisfies the terms of the contract sale.
With a true wrap around mortgage ,title actually gets recorded and transferred to the buyer.
This is Legal Title, as where with a contract sale, the buyer merely has "Equitable title" or "Equitable interest."
If considering doing these, check with a competent local legal advisor to set it up, since state laws are VERY specific with regard to these things, and vary from state to state.
HTH,
Jim FL
[addsig]
Perfect, thanks for the info....