Question 1

What is a wraparound mortgage?

Accepted Answer

A new, larger note that "wraps" an existing loan the seller doesn't pay off. The buyer pays the seller on the wrap note; the seller keeps paying the underlying loan (or the buyer's payment is structured to cover it) and pockets the difference.

Question 2

What's the difference between a wraparound and subject-to?

Accepted Answer

Subject-to is the special case of a two-note wrap where the buyer simply takes over the existing payment at the same rate — no markup on the underlying loan itself. A wraparound more broadly includes structures where the seller charges a spread on the underlying portion too.

Question 3

What's the difference between two-note and all-inclusive (AITD)?

Accepted Answer

Two-note treats the seller-financed piece and the underlying loan as separate, parallel notes. AITD combines everything into one note on the full wrapped balance, with the seller alone responsible for the underlying loan out of what's collected. The two can produce different numbers from the same inputs.

Question 4

Where does the seller's profit in a wrap come from?

Accepted Answer

The rate spread between what the buyer pays on the wrap note and what the seller pays on the underlying loan. In a two-note structure that spread holds steady as long as the underlying loan is outstanding; in AITD it's a rate spread on a shrinking balance, so it declines as the underlying amortizes.

Question 5

Is a wraparound mortgage legal?

Accepted Answer

Wraps are used in many states, but most existing mortgages carry a due-on-sale clause that lets the original lender call the loan due if the property is sold or financed this way without their consent. That's a real risk to weigh with an attorney, not something this calculator can price.

Question 6

What happens if the underlying loan has its own balloon or matures before the wrap note?

Accepted Answer

Whoever is responsible for the underlying loan has to refinance or pay it off on its own schedule, independent of the wrap note's term — a mismatch this calculator flags as a caution.

Wraparound Mortgage Calculator