In a wraparound mortgage, the seller is on both sides of two loans at once — collecting a payment from the buyer while still paying their own underlying mortgage — pocketing the difference.
How it works
Both payments are computed as standard amortized loans: the wrap loan the seller extends to the buyer, and the seller’s own underlying mortgage still outstanding. Subtracting the underlying payment from the wrap payment gives the seller’s monthly spread.
What this does not include
Most underlying mortgages contain a due-on-sale clause that can be triggered by a wraparound arrangement — a legal and lender-relationship risk this calculator’s math doesn’t address, since it computes cash flow only, not enforceability.
How to use this calculator
- Enter the wraparound loan amount, rate, and term.
- Enter the seller’s underlying mortgage balance, rate, and remaining term.
Frequently asked questions
Why would a seller offer a wraparound mortgage?
To earn the spread between the wrap rate charged to the buyer and the lower rate still owed on the underlying loan — plus the difference in loan amount, since the wrap is usually larger than what it wraps.
What is a due-on-sale clause risk?
Many mortgages let the lender demand full repayment if the property is sold or transferred — a wraparound doesn’t formally transfer the underlying loan, but it can still trigger this clause depending on the lender and loan terms.
Can the spread be negative?
Yes — if the wrap rate is set below the underlying rate, the seller loses money carrying the arrangement, reported here plainly.
