Wraparound Mortgage
Direct definition
A financing structure where the seller keeps the existing mortgage and holds a new, larger loan that 'wraps' around it.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Wraps are seller-financing arrangements. They can conflict with due-on-sale clauses and carry legal risk if not documented carefully.
Why it matters
Wraps can facilitate a sale in specific scenarios but require experienced counsel to structure.
Where you may see it
- Seller financing agreement
- Promissory note
- Title commitment
A real-world example
A seller with a $200,000 mortgage sells for $350,000, holding a $325,000 wrap note while continuing to pay the underlying loan.
Educational and illustrative only
A common misunderstanding
A wraparound mortgage doesn't pay off or replace the original loan — the seller keeps their existing mortgage in place and layers a new loan on top of it.
Ask Vabasso AI
This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026