Wraparound Mortgages?

Comments(7)

• 
  Derek07831st July, 2004

  I mean, "Thanks in *Advance", not "Advace."

• 
  JohnLocke1st July, 2004

  Derek,
  
  Glad to meet you.
  
  All Inclusive Trust Deed (AITD/Wrap-Around)
  
  A junior Deed of Trust securing a promissory note, the face amount of which is the sum of the liability secured by prior Trust Deeds plus the cash or equity advanced by the AITD lender.
  
  http://www.cindybaek.com/Docs/All-Inclusive.htm
  
  John $Cash$ Locke
  [addsig]

• 
  bgrossnickle1st July, 2004

  John, can you explain a bit more. When would you use a wrap around mortgage? what are some of the pros and cons.
  
  Thanks
  
  Brenda

• 
  patojetlim1st July, 2004

  Hi Derek,
  Wraparound mortgage, also called an all inclusive trust deed, is a financing tool where a new mortgage is placed in a subordinate (secondary) position to the original mortgage and the new mortgage includes the unpaid balance of first.
  
  Here's how it works:
  The seller holds onto the existing mortgage
  The seller names the property's selling price
  The seller offers the buyer a loan at a higher interest rate than
  the existing mortgage
  The buyer pays the seller a fixed monthly amount and
  The seller uses part of this money towards the existing loan.
  ** The lender's incentive is to profit from the difference in interest in the two loans.
  
  The wraparound mortgage is a creative way to allow a buyer to purchase property without having to qualify for a loan or to pay closing costs. The contract is made between the buyer and seller with seller remaining on the original mortgage and title.
  
  Hope this helps.
  Patrick

• 
  JohnLocke1st July, 2004

  Brenda,
  
  It is just another way of Seller Financing, even when the home has an existing loan or loans.
  
  When the seller doesn't own your home free-and-clear, it is possible to use existing loans to create a "wrap-around mortgage" to capture some of the benefits (Such as Keeping the Existing Interest rate) Also commonly referred to as an "All Inclusive Trust Deed," this is another credit sale security device that is used by carryback sellers to provide their buyer in financing a sale.
  
  For a buyer, the All-Inclusive Trust Deed (AITD) is the entire amount of financing agreed to, and the amount of the AITD includes the existing underlying loan.
  
  The buyer makes monthly AITD payments to the seller, and the seller, in turn, makes payments to the underlying lender.
  
  This option can provide a seller and buyer the same tax advantages of Seller Financing, but in a slightly different form.
  
  John $Cash$ Locke

• 
  Derek07832nd July, 2004

  Thanks JohnLocke and Patojetlim,
  
  But that seems exactly like what a Contract-For-Deed is.
  
  OK, so if I understand correctly, a WrapAround is when a seller finances the buyer in order to pay off his/her original mortgage; and make some extra profit by setting the Wraparound mortgage interest higher than the buyers original mortgage.
  
  I thought a contract for Deed is when the seller accepts a down payment from the buyer and finances the rest of the purchase price.
  
  So whats the difference(s) between a Contract for Deed and a Wraparound?

• 
  bgrossnickle2nd July, 2004

  Wraparound mortgage / all inclusive trust deed - What is the paperwork involved?
  
  Deed, Mortgage, Note, ... what agreement is signed for the payment amount?
  
  Brenda