what is a wrap around loan 
a wrap around loan is a type of mortgage loan that can be used in owner financing deals this type of loan involves the seller s mortgage on the home and adds an additional incremental value to arrive at the total purchase price that must be paid to the seller over time understanding wrap around loansthe form of financing that a wrap around loan relies on is commonly used in seller financed deals a wrap around loan takes on the same characteristics as a seller financed loan but it factors a seller s current mortgage into the financing terms seller financing is a type of financing that allows the buyer to pay a principal amount directly to the seller seller financing deals have high risks for the seller and usually require higher than average down payments in a seller financed deal the agreement is based upon a promissory note that details the terms of the financing in addition a seller financed deal doesn t require that principal be exchanged upfront and the buyer makes installment payments directly to the seller which include principal and interest 1wrap around loans can be risky for sellers since they take on the full default risk on the loan sellers must also be sure that their existing mortgage does not include an alienation clause which requires them to repay the mortgage lending institution in full if collateral ownership is transferred or if the collateral is sold alienation clauses are common in most mortgage loans which often prevent wrap around loan deals from occurring 