Ace the Washington State Real Estate Challenge 2025 – Unlock Your Path to Success!

A wraparound mortgage is a type of secondary financing where a new mortgage effectively encompasses an existing mortgage. This arrangement allows a borrower to take out a new loan that includes the outstanding balance of the existing mortgage and is larger than that amount. The borrower makes payments to the new lender, who in turn continues making payments on the original mortgage.

This is advantageous in situations where the existing mortgage has a lower interest rate than what is currently available in the market, allowing the borrower to maintain the benefits of the original loan while accessing additional funds. A wraparound mortgage can facilitate financing without requiring a full refinancing of the earlier mortgage, making it a flexible financing option for both sellers and buyers.

The other options describe different financing scenarios that do not accurately illustrate the concept of a wraparound mortgage. A wraparound mortgage specifically depends on both the existence of a primary mortgage and secondary financing which addresses the need for additional funds while still considering the original loan balance.