Wraparound Mortgage Financial Glossary

What is it? A second mortgage that takes over the first. The first mortgage loan is not paid off. Instead, the borrower makes payments to the second mortgage lender for the debt service of both the first and second liens. The second lien holder then makes the payments to the first lien holder. This type of mortgage is used when the borrower is unwilling or unable to refinance the first mortgage. Prepayment of the first mortgage may be prohibited or may be subject to high penalties. Alternatively, the first mortgage may have a very attractive fixed rate of interest. The wraparound arrangement permits the borrower to leave the first mortgage intact while giving more control to the lender willing to make the second mortgage.

Finance Term Definition Added By: Hunter

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