Wrap Around Mortgages

Wrap Around Mortgages - Small Business Startup

Wrap Around Mortgages can be used for your Small Business Startup. Wrap Around Mortgages - usually means that there is an assumable loan on the property, say $30,000 at 6 percent, and that a seller or other party takes back a loan for the buyer, say, $100,000 at 8 percent. The $100,000 consists of the continued loan obligation to repay the old $30,000 debt and $70,000 in new debt. The seller or lender actually receives 2 percent interest on the first $30,000 and 8 percent on the remaining $70,000. Since the seller or lender did not provide the first $30,000, the rate of return for the $70,000 they did provide is substantially higher than 8 percent.

Because wrap-around mortgaging raises a number of complex issues, both buyers and sellers should individually consult with attorneys and tax professionals prior to accepting such arrangements.

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