Finance
A wraparound mortgage is a form of seller financing in which:
AThe seller pays off the existing mortgage before conveying title
BThe seller creates a new mortgage that includes the existing mortgage balance, and continues making payments on the underlying loan✓ Correct
CThe buyer assumes the seller's existing mortgage directly
DThe lender wraps the closing costs into the loan amount
Explanation
A wraparound mortgage is a junior mortgage that 'wraps around' the existing first mortgage. The seller collects payments from the buyer on the larger wraparound amount and continues paying the original lender.
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Key Terms to Know
Closing Costs
Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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.
Math Concepts
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