What Happens If the Owner Still Has a Mortgage?

Not every seller owns their home free and clear. When the seller still has an existing mortgage, a wraparound mortgage arrangement is sometimes used to structure the sale.

How a Wraparound Mortgage Works

The seller keeps their existing mortgage in place. You make payments to the seller, and the seller uses part of that payment to keep their original mortgage current, while keeping the difference as their profit or return.

What to Watch For

• Confirm the seller's existing mortgage balance and payment history
• Understand what happens if the seller falls behind on their original mortgage
• Check for a due-on-sale clause that could complicate the transfer

Why This Needs Careful Structuring

If the seller stops paying their original lender, your home could be at risk even if you're current on your payments to the seller. Proper legal structuring and safeguards are essential.

Bottom Line

Wraparound deals can work well, but they require extra diligence and, ideally, an attorney experienced in this specific type of transaction.

Learn more about wraparound structures at ownerfinancedhomesforsale.com.

This article shares general educational information about owner financing and is not legal or financial advice. Consult a licensed real estate attorney or financial professional before entering into any owner financing agreement in your state.