A wrap-around mortgage is a form of seller financing in which the seller keeps their existing mortgage and gives the buyer a new, larger loan that “wraps” around it. The buyer pays the seller each month, and the seller keeps paying the original lender. The seller may earn interest on the difference. It can open a path to ownership, but it stacks two loans on one property and needs careful handling.

A simple example

A seller owes a balance on an existing loan and sells for a higher price. The buyer makes a down payment and signs a note to the seller for the rest. The buyer pays the seller, and the seller continues to pay the original lender from those payments. The numbers, interest rates and terms are negotiated by the parties.

Why parties consider it

  • A buyer who cannot get a standard loan may still be able to buy
  • A seller may earn interest income and sell more easily
  • Both sides may close faster than with a bank loan

Risks and things to check

  • The due-on-sale clause in the seller’s existing loan may allow the lender to call it when the property is transferred
  • Payment handling. If the seller does not pay the underlying loan, the buyer can lose the home. Many deals use a third-party servicer to protect both sides.
  • Lending and licensing rules. Federal and state rules may apply to seller-financed transactions
  • Title, insurance and taxes must be set up correctly
  • Default and foreclosure. The contract should spell out what happens if someone stops paying

Use a real estate attorney

This structure needs a Georgia real estate attorney to draft the documents and set up the closing. If you need one, Nil can introduce you to attorneys from our network who are paid at closing.

We help buyers and sellers across Atlanta, Brookhaven, Decatur, Duluth, Ellenwood, Griffin, Hampton, Lawrenceville, Lilburn, Locust Grove, McDonough, Norcross, Snellville, Stockbridge, Stone Mountain and Tucker understand their options. We are not lenders and cannot promise any outcome.

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Related: seller financing and sub-2.

Nil Patel is a licensed Georgia real estate salesperson with Keller Williams Realty Atlanta Partners. This page is general information, not legal, tax or financial advice, and nothing here is a commitment to lend. Talk to a lender and a real estate attorney about your own situation. Creative financing structures can carry legal, tax and lender-consent risks. Talk with a real estate attorney before you proceed with a subject-to, wrap-around, lease option, lease purchase or seller-financed purchase.