Thursday, September 10, 2009

Seller Financing through Wraparound loans

Wraparound financing has become popular in many real estate markets, though state laws limit its use in some locations. Monthly payments on an old, low-interest mortgage continue to be the responsibility of the seller when an existing home is sold. However, the seller receives from the home buyer a new mortgage at higher interest rate and therefore providing for larger monthly payments. The seller pockets the difference between the monthly payments on the old and new mortgages. However, a portion of the seller‘s gain is passed on to the buyer, who gets a new mortgage at lower interest rate than is generally available from regular mortgage lenders.

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