Wrap
A wrap means a wrap around mortgage.
It’s called a wrap because it’s a type of seller financing where the seller agrees to create a brand new mortgage that wraps around the existing financing. The existing financing could be the first mortgage or first and second mortgage.
You need to get permission from the lien holders to do the wrap around. You can’t just wrap any existing financing you want to,
So as an example, let’s say the house is worth $100,000 and the existing first mortgages balance is $80,000,
You sell the house for $100,000 but create a new first mortgage on a wraparound mortgage up $100,000.
Now there’s a payment that goes to the seller usually for the Piti payment of the new First Mortgage of $100,000. We recommend that you directly pay through a loan servicer or no service or company the Piti payment, if there’s any excess that gets paid to the owner seller.
The worst thing that can happen is that if you pay this bill on time and the seller doesn’t pay the underlying mortgage payment.
See AITD or all inclusive trust deed, which is basically the same thing as a wrap around mortgage.
