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  • The Financial Encyclopedia
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Banking

  Banking   |   Terms
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  • December 22, 2022
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Wrap

A jargon term for wraparound mortgage; a type of subordinate mortgage (junior mortgage) in which the principal obligation is secured by one or more superior mortgage loan against the same underlying property. The seller of this property extends a wraparound loan to the buyer who gets the title under the first mortgage. This mortgage is wraparound (enveloped) by the new mortgage(s). In other words, the seller takes a mortgage from the buyer against an amount including the outstanding balance of the existing mortgage.

Wraparound mortgages are a form of seller financing. However, sellers unwilling to finance the sale can walk away, leaving room for a third-party lender to take the mortgage.


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