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.
Travis Texas Wraparound Mortgage, also known as a wraparound mortgage or an all-inclusive trust deed, is a type of creative financing option in real estate transactions. It allows a seller to sell their property while keeping the existing mortgage in place. This mortgage type is commonly found in Travis County, Texas. In a Travis Texas Wraparound Mortgage, the buyer assumes the seller's existing mortgage and agrees to make monthly payments on the outstanding balance. In return, the seller provides financing for the remaining balance by creating a new second mortgage or promissory note, often called the wraparound mortgage. The second mortgage "wraps around" the original mortgage, combining the balances into a single loan. This type of mortgage offers several benefits for both sellers and buyers. For sellers, it allows them to sell their property quickly without paying off the current mortgage. They can also earn additional interest on the wraparound mortgage they provide to the buyer. Buyers benefit from this arrangement as they can acquire a property without obtaining traditional financing, especially if they have difficulty qualifying for a new loan. Travis Texas Wraparound Mortgage comes in two primary forms, known as "pure" wraparound mortgages and "modification" wraparound mortgages. 1. Pure Wraparound Mortgage: In this scenario, the seller's original mortgage remains as is, and the buyer assumes responsibility for making payments on it. The seller then creates a new second mortgage that "wraps around" the existing mortgage. The buyer pays the seller directly for this wraparound mortgage, which includes the remaining balance on the original mortgage plus any additional financing provided by the seller. 2. Modification Wraparound Mortgage: In this type, the seller modifies the original mortgage terms to accommodate the characteristics of the wraparound mortgage. The original lender must agree to this modification. This form of wraparound mortgage is considered less common than the pure wraparound mortgage. Travis Texas Wraparound Mortgage provides flexibility and financing options for buyers who might not qualify for conventional loans and benefits sellers by allowing them to sell their property quickly, potentially earning higher interest on the secondary mortgage. It is critical for both parties to conduct thorough due diligence, consult with legal professionals, and understand the terms and risks associated with this financing method.
