In a wraparound mortgage, who is primarily responsible for the existing loan?

In a wraparound mortgage, the seller retains responsibility for the existing loan that is being wrapped into a new mortgage agreement with the buyer. This financing arrangement allows the seller to offer financing to the buyer while still maintaining their original mortgage. The buyer makes payments to the seller, who in turn continues to make payments on the original loan. This is advantageous for both parties as it can facilitate a sale when traditional financing options are less accessible.

The seller effectively becomes the intermediary, benefiting from the difference between the payments received from the buyer and those paid on the existing loan, thus providing an opportunity for negotiation regarding the sale and financing terms. The buyer is not responsible for the existing loan; instead, they make payments to the seller, relying on the seller’s obligation to manage that loan. Therefore, in a wraparound mortgage setup, the seller is primarily accountable for the existing loan while offering attractive financing terms to the buyer.