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 Wyoming wraparound mortgage, also known as an all-inclusive deed of trust or AID, is a specialized financing technique that enables a buyer to assume the existing mortgage on a property while also obtaining additional financing from the seller. This type of mortgage is commonly used in real estate transactions where traditional financing options may be limited or difficult to obtain. A Wyoming wraparound mortgage allows the buyer to benefit from the existing low-interest rate and favorable terms of the original mortgage, without having to secure a separate loan. The seller, on the other hand, can benefit by earning interest on the wraparound mortgage and by selling a property that might otherwise be difficult to sell in a competitive market. In a Wyoming wraparound mortgage, the original mortgage remains in place, and the seller extends a second mortgage to the buyer, called the wraparound mortgage. The buyer makes payments to the seller, who then uses a portion of these payments to satisfy the original mortgage. The remaining amount is considered the seller's profit or income from the property. There are different types of Wyoming wraparound mortgages, including: 1. Junior Wraparound Mortgage: In this type, the seller extends a wraparound mortgage that is subordinate to the existing mortgage, meaning the seller's mortgage takes priority after the original mortgage is paid off. This type of wraparound mortgage offers more security to the seller. 2. Senior Wraparound Mortgage: In this case, the seller extends a wraparound mortgage that has a higher priority than the existing mortgage. This means that the wraparound mortgage will be paid off first in case of foreclosure or sale, and the remaining funds are used to pay off the original mortgage. 3. Fixed-Rate Wraparound Mortgage: This type of Wyoming wraparound mortgage has a fixed interest rate, providing stability to both the buyer and seller throughout the loan term. The interest rates on the original mortgage and the wraparound mortgage may differ. 4. Adjustable-Rate Wraparound Mortgage: With this type, the interest rate on the wraparound mortgage adjusts periodically, based on market conditions. The rate is typically tied to an index, such as the U.S. prime rate or treasury bill rate. The buyer and seller should agree on the terms and frequency of adjustment. It's important to note that Wyoming wraparound mortgages carry certain risks, particularly for the buyer. If the seller fails to make payments on the original mortgage, the buyer may risk losing the property through foreclosure. Additionally, the buyer must ensure that the existing mortgage contract allows for the assumption and/or wraparound financing. When entering into a Wyoming wraparound mortgage, it is crucial for both the buyer and seller to seek legal and financial advice to understand the terms, risks, and obligations involved.
