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Real Estate Glossary

What is Wraparound Mortgage?

A wraparound mortgage is a type of financing that allows a borrower to take out a new loan to pay off an existing loan, while also including additional funds for other purposes, such as home improvements or debt consolidation. The new loan, or wraparound loan, includes the unpaid balance of the original loan and an additional amount, which is secured by a mortgage on the property. The borrower makes payments on the wraparound loan to the new lender, who in turn, makes payments on the original loan to the original lender. This type of loan can be useful for borrowers who have difficulty qualifying for a traditional mortgage but Wraparound mortgage is not legal in all states.