wraparound mortgage

Definition

Method used as an alternative to refinancing an entire existing mortgage loan when the mortgagor needs to borrow additional sums against the same asset. The lender combines the unpaid balance on the original loan with the new loan for which the borrower makes one monthly payment (shared between the first lender and the new lender, if different). In this arrangement, the borrower saves penalties associated with a new mortgage and the lender gets to charge new (usually higher) interest rate on the entire loan amount. Also called all inclusive mortgage.

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