One of the more interesting questions I received the other day is this: What is a wrap around mortgage?

This type of mortgage loan is becoming quite rare, because the loan has to be assumable (meaning someone else can take over the mortgage and the payments). Some state loan programs and the VA and FHA loans are the few writers left for assumable mortgage loans.

Mtgprofessor.com explains how the wrap around mortgage works:

A wrap-around mortgage is a loan transaction in which the lender assumes responsibility for an existing mortgage. For example, S, who has a $70,000 mortgage on his home, sells his home to B for $100,000. B pays $5,000 down and borrows $95,000 on a new mortgage. This mortgage "wraps around" the existing $70,000 mortgage because the new lender will make the payments on the old mortgage.

While it doesn’t always have to be, the wrap around mortgage is often a seller financing technique.