Finance
In South Dakota, a wraparound mortgage is a financing arrangement where:
AThe new loan is subordinate to all existing liens
BA new mortgage wraps around and includes an existing mortgage, with the seller/lender continuing to service the original loan✓ Correct
CThe lender wraps additional collateral around the loan
DThe buyer assumes all existing loans simultaneously
Explanation
A wraparound mortgage has the seller/lender create a new, larger mortgage that 'wraps around' the existing loan. The buyer makes payments on the wraparound, and the seller/lender continues paying the underlying loan.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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