A wraparound mortgage is a junior encumbrance that is ordinarily made when property will support additional financing, and the mortgagor does not want to prepay a favorable existing mortgage obligation but needs additional cash, or where the existing obligation precludes prepayment or contains an excessive prepayment penalty. In such an instrument, the wraparound beneficiary charges interest on the entire amount of the wraparound loan and agrees to make the principal and interest payments on the existing prior encumbrance as it collects principal and interest payments from the mortgagor.
A Hawaii Wraparound Mortgage, also known as an All-Inclusive Deed of Trust or Wraparound Loan, is a special type of mortgage that allows a buyer to finance the purchase of a property while assuming an existing mortgage secured on that property. This financing method is particularly popular in Hawaii due to its unique real estate market and the presence of many desirable properties. In a Hawaii Wraparound Mortgage, the buyer creates a new loan that "wraps around" the existing mortgage, combining the old loan and the new loan into one single mortgage. This arrangement allows the buyer to effectively take over the existing mortgage while providing additional financing for the purchase price difference. It eliminates the need for the buyer to secure a new loan and qualify for a separate mortgage, thus making it a convenient and accessible financing option. There are two primary types of Hawaii Wraparound Mortgages commonly used: 1. Junior Wraparound Mortgage: In this type, the buyer obtains a new mortgage loan that is higher than the existing mortgage loan. The new loan covers the difference between the purchase price and the outstanding balance of the existing mortgage. The buyer then makes a single monthly payment to the seller, who in turn will continue making payments on the existing mortgage. This type of wraparound mortgage allows for financing flexibility and offers a simpler transaction process. 2. Senior Wraparound Mortgage: In this type, the buyer obtains a new mortgage loan that is lower than the outstanding balance of the existing mortgage loan. The new loan covers the difference between the purchase price and the amount of the new mortgage loan. The buyer's monthly payment is made to the seller, who in turn pays the existing mortgage lender. The remaining amount from the buyer's mortgage payment is retained by the seller as additional income. This type provides the seller with additional cash flow and may be beneficial when the seller's existing loan has a lower interest rate than what is available in the market. Overall, a Hawaii Wraparound Mortgage offers buyers an opportunity to finance a property purchase efficiently and conveniently, benefiting both the buyer and seller. It is crucial to consult with a qualified real estate attorney or mortgage professional when considering this financing option, as legal and financial complexities may arise.A Hawaii Wraparound Mortgage, also known as an All-Inclusive Deed of Trust or Wraparound Loan, is a special type of mortgage that allows a buyer to finance the purchase of a property while assuming an existing mortgage secured on that property. This financing method is particularly popular in Hawaii due to its unique real estate market and the presence of many desirable properties. In a Hawaii Wraparound Mortgage, the buyer creates a new loan that "wraps around" the existing mortgage, combining the old loan and the new loan into one single mortgage. This arrangement allows the buyer to effectively take over the existing mortgage while providing additional financing for the purchase price difference. It eliminates the need for the buyer to secure a new loan and qualify for a separate mortgage, thus making it a convenient and accessible financing option. There are two primary types of Hawaii Wraparound Mortgages commonly used: 1. Junior Wraparound Mortgage: In this type, the buyer obtains a new mortgage loan that is higher than the existing mortgage loan. The new loan covers the difference between the purchase price and the outstanding balance of the existing mortgage. The buyer then makes a single monthly payment to the seller, who in turn will continue making payments on the existing mortgage. This type of wraparound mortgage allows for financing flexibility and offers a simpler transaction process. 2. Senior Wraparound Mortgage: In this type, the buyer obtains a new mortgage loan that is lower than the outstanding balance of the existing mortgage loan. The new loan covers the difference between the purchase price and the amount of the new mortgage loan. The buyer's monthly payment is made to the seller, who in turn pays the existing mortgage lender. The remaining amount from the buyer's mortgage payment is retained by the seller as additional income. This type provides the seller with additional cash flow and may be beneficial when the seller's existing loan has a lower interest rate than what is available in the market. Overall, a Hawaii Wraparound Mortgage offers buyers an opportunity to finance a property purchase efficiently and conveniently, benefiting both the buyer and seller. It is crucial to consult with a qualified real estate attorney or mortgage professional when considering this financing option, as legal and financial complexities may arise.
