Legal Definitions - wraparound mortgage

A wraparound mortgage is a type of second mortgage that is issued when a lender assumes the payments on the borrower's low-interest first mortgage, usually issued through a different lender, and lends additional funds. This mortgage covers both the outstanding balance of the first mortgage and the additional funds loaned.

For example, if a borrower has a first mortgage of $100,000 with a low-interest rate, and they need an additional $50,000, they can get a wraparound mortgage for $150,000. The borrower will make payments on the wraparound mortgage, which will include the payments for the first mortgage and the additional funds borrowed.

Wraparound mortgages are also known as extended first mortgages or all-inclusive mortgages.