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Wraparound Mortgage Real Estate 2025: What Is a Wraparound Mortgage?
A wraparound mortgage (or “wrap”) is a form of seller financing.
Here’s how it works:
- Seller already has a mortgage on the property.
- Seller creates a new loan to the buyer for the full price (the “wrap”).
- Buyer makes payments to the seller.
- Seller continues paying their underlying mortgage.
The new loan “wraps around” the existing mortgage.
Example:
- Seller owes $100,000 at 3% interest.
- Sells property for $150,000 with a wrap note at 7%.
- Buyer pays seller on $150,000.
- Seller pockets the difference between 7% and the 3% they’re paying the bank.
Real-Life Story: Columbus, Ohio Wrap Deal
An investor in Columbus, Ohio found a 3-bedroom house worth $220,000.
- Seller still owed $120,000 on their mortgage at 3.5%.
- Investor agreed to buy for $200,000 with a wrap mortgage at 7%.
- Buyer made payments directly to the seller.
- Seller continued paying the original mortgage.
After two years, the investor resold the property for $240,000 — netting $35,000 in profit after paying off the seller.
Without a wrap, the investor couldn’t have acquired the property without large bank financing.
Wraparound Mortgage Real Estate 2025: Why Use Wraps?
- Solve Seller Problems
Many sellers don’t have enough equity to sell traditionally. Wraps let them cash flow or exit quickly. - Buy Without Banks
No credit checks, no conventional underwriting — terms are set between buyer and seller. - Cash Flow Opportunities
The spread between the wrap interest rate and underlying loan creates monthly cash flow.
As Scott Jelinek of Slow Flip Academy says:
“Creative finance is about turning no-deals into yes-deals. Wraps are one of the most underutilized tools.”
Wraparound Mortgage Real Estate 2025: Risks & Challenges
- Due-on-sale clause → Banks could call the loan due if they discover the sale.
- Seller reliability → If seller pockets payments and doesn’t pay their bank, buyer could face foreclosure.
- Legal complexity → Must be structured by an attorney or title company.
Our Solution: We structure wraps with escrow servicing companies so payments go directly to the mortgage — protecting all parties.
Wraparound Mortgage Real Estate 2025: Best Practices
- Always verify seller’s loan terms and payment history.
- Use a third-party loan servicing company.
- Be upfront with sellers about risks.
- Factor in double closing costs if reselling.
FAQs About Wraparound Mortgage Real Estate 2025
Q: Is a wraparound mortgage legal?
Yes, wraps are legal, but they must comply with state laws and existing loan terms.
Q: Can banks call the loan due?
Yes — but in practice, most banks only enforce due-on-sale if payments stop.
Q: Who benefits from wraps?
Both sides: sellers exit without foreclosure, buyers acquire property without bank loans.
Q: Can your company help structure wraps?
Yes, we connect investors with attorneys, escrow companies, and provide funding solutions for wraps.
