wraparound loan

Popular Terms
Refinancing technique in which the new mortgage is placed in a secondary, or subordinate, position; the new mortgage includes both the unpaid principal balance of the first mortgage and whatever additional sums are advanced by the lender. In essence it is an additional mortgage in which another lender refinances the borrower by lending an amount over the existing first mortgage amount, but without disturbing the existence of the first mortgage. Wraparound loans are popular where the borrower wishes to obtain cash through the refinancing of an existing loan but the present lender is unwilling to do so at reasonable terms; and a conventional second mortgage from another lender may be unavailable or unworkable owing to excessively high interest and/or debt service; or the existing loan has an interest rate well below current market rates.


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