wraparound loan

A financing device that permits an existing loan to be refinanced and new money to be advanced at an interest rate that is between the rate charged on the old loan and the current market interest rate. The creditor combines, or wraps, the remainder of the old loan with the new loan at the intermediate rate. A wraparound loan also may be called a wraparound mortgage, if a new mortgage is placed in a secondary position to the original mortgage with the new mortgage including the unpaid balance of the first mortgage. The buyer of the property assumes the remaining debt of the seller’s current mortgage.