Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.
Wrap-Around Loan
A wrap-around loan is a form of seller financing where the seller retains the existing underlying mortgage and originates a new purchase-money note to the buyer for a larger balance, collecting payments while continuing to pay the original loan.
Exam context
Wrap-around: seller keeps old loan, sells new wrap note to buyer. Seller remains liable on underlying mortgage. Due-on-sale clause may trigger acceleration. Distinct from lease-option and land contract.
Structure and cash flow
The buyer pays the seller on the wrap note, typically at a higher rate or balance than the underlying loan. The seller remits payments to the first lender and keeps the spread. Title may transfer while the original mortgage remains in the seller name, creating contingent liability if the buyer defaults.
Legal and practical risks
Most modern deeds of trust include due-on-sale clauses allowing the lender to accelerate if ownership changes without approval. Wraps may violate loan terms even when payments stay current. Agents should warn parties about default cascades, disclosure requirements, and safer alternatives such as formal assumption or new institutional financing.
Examples
Spread income
Seller owes $180,000 at 4%. Buyer pays seller on a $220,000 wrap note at 6%. Seller pays the first mortgage and retains the interest spread until the wrap is paid or refinanced.
Default cascade
Buyer stops paying the wrap. Seller must still pay the underlying lender to avoid foreclosure on their credit, then pursue remedies against the buyer under the wrap note.
Keep studying
Related terms
- Purchase-money mortgageSeller carryback financing context for wrap notes.
- Owner financingBroader seller-financing strategies and risks.
Related resources
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- Real estate glossary hub
Browse all published national glossary entries.
- Florida exam topic hub
Florida-specific explainers and question sets for this topic area.
Sources
- CFPB: seller financing overview(Consumer Financial Protection Bureau)