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 Kansas Wraparound Mortgage is a type of financing arrangement that allows a homebuyer to purchase a property without having to obtain traditional bank financing. This alternative mortgage option is beneficial for both buyers and sellers in scenarios where the buyer's creditworthiness or down payment may be less desirable to traditional lenders. In a Kansas Wraparound Mortgage, the buyer acquires the property with the help of the seller, who acts as the lender. This type of mortgage essentially wraps around the existing mortgage on the property, combining the seller's existing mortgage with the new mortgage provided by the seller. One of the key advantages of a Kansas Wraparound Mortgage is that it allows the buyer to secure favorable terms and conditions that may not be available through traditional lenders. It provides flexibility in structuring the mortgage as per the buyer's financial situation, offering potentially lower interest rates and down payment requirements. Different types of Kansas Wraparound Mortgages include: 1. Straight Wraparound Mortgage: This type involves the buyer making regular mortgage payments to the seller, who, in turn, uses a portion of those payments to cover the underlying mortgage on the property. The remaining amount goes towards the buyer's mortgage principle and interest. 2. All-Inclusive Wraparound Mortgage: In this type, the buyer assumes the seller's existing mortgage, and the new mortgage amount includes the balance owed on the original mortgage. The buyer makes a single mortgage payment to the seller, who then pays the underlying mortgage on the property. This type is sometimes referred to as an "AID" (All-Inclusive Trust Deed) mortgage. 3. Velocity Mortgage: While not specific to Kansas, the Velocity Mortgage is a popular form of Wraparound Mortgage. It allows the buyer to finance multiple properties through a single mortgage, benefiting from increased purchasing power and potential tax advantages. Kansas Wraparound Mortgages require careful consideration, detailed documentation, and legal expertise to ensure compliance with state and federal regulations. It is crucial for both buyers and sellers to consult with experienced real estate attorneys or mortgage professionals before entering into such arrangements. Overall, Kansas Wraparound Mortgages present a unique opportunity for buyers and sellers to navigate real estate transactions creatively. They can provide an alternative financing option that suits the needs of both parties involved while circumventing the stringent requirements of traditional lending institutions.
