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.
Idaho Wraparound Mortgage, also known as an Idaho All-Inclusive Trust Deed (AID), is a type of financing arrangement that allows a buyer to assume an existing mortgage while obtaining additional financing from the seller. This type of mortgage is commonly used in real estate transactions when the buyer does not qualify for traditional financing or wants to avoid the costs and complexities associated with obtaining a new mortgage. A Wraparound Mortgage works by including the seller's existing mortgage loan within the new loan. The buyer makes payments to the seller, who, in turn, continues making payments to the original lender. This arrangement "wraps" the existing loan with a new loan, which combines the remaining balance on the original mortgage with the additional funds required by the buyer. In Idaho, there are a few different types of Wraparound Mortgages: 1. Junior Wraparound Mortgage: In this type, the buyer obtains additional financing from the seller, and the seller becomes a secondary lien holder. The seller's loan "wraps" around the existing first mortgage, and the buyer makes a single payment to the seller, who then distributes the appropriate amounts to the first mortgage lender. 2. Senior Wraparound Mortgage: This type is the reverse of the junior wraparound mortgage. The seller assumes the buyer's existing mortgage and becomes the primary lien holder. The seller provides additional financing to the buyer, and the buyer makes a single payment to the seller, who then pays the existing mortgage and keeps the remaining funds. 3. Blanket Wraparound Mortgage: This type involves the financing of multiple properties or parcels of land under a single loan. A buyer can purchase multiple properties, usually with different loans, and then consolidate them into a single wraparound mortgage. The seller receives payments from the buyer and uses those funds to pay off the underlying individual mortgages. 4. Simultaneous Wraparound Mortgage: In this scenario, the buyer purchases the property using both a first mortgage from a traditional lender and a wraparound mortgage from the seller. The buyer makes payments to both lenders separately. It is important to note that Idaho Wraparound Mortgages should be approached with caution. Both the buyer and seller should consult legal and financial professionals to understand the risks, benefits, and implications associated with these types of agreements.
