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.