Legal Definitions - all-inclusive mortgage

An all-inclusive mortgage, also known as a wraparound mortgage, is a type of mortgage that includes the outstanding balance of an existing mortgage and additional funds borrowed by the borrower. The lender assumes the payments on the borrower's low-interest first mortgage and lends additional funds. The borrower makes payments to the new lender, who then pays the original mortgage lender.

For example, if a borrower has a $100,000 mortgage with a 5% interest rate and wants to borrow an additional $50,000, they can take out an all-inclusive mortgage for $150,000 with a new lender. The new lender assumes the payments on the original mortgage and lends the additional $50,000. The borrower makes payments to the new lender, who then pays the original mortgage lender.

All-inclusive mortgages are beneficial for borrowers who have a low-interest rate on their existing mortgage and want to borrow additional funds without refinancing their original mortgage. However, they can be risky for lenders because they are assuming the payments on the original mortgage and may not have the same level of security as a traditional mortgage.