This is a form of seller financing that happens when rates get too high and people do not qualify and sellers have equity. For example, Seller agrees to fund $200,000 and the existing loan is $400,000. A loan is established for $600,000 and it is a combination of the two loans and is recorded as a junior mortgage – it “wraps” the two mortgages together.
So many problems, but it does sell properties. It is difficult to find properties that are assumable and the documentation of the terms is high profile. You need attorneys and accountants and skilled salespersons to put this together. Check this article that was in several newspapers in Southern California and was written by Jeff Lazerson, one of my favorite MLO students.
Click here to read more on wraparound mortgages.
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