What is a common benefit of a wraparound mortgage?

A wraparound mortgage is a type of financing that allows a buyer to purchase a property while the seller retains their existing mortgage. In this arrangement, the seller provides a new mortgage to the buyer that "wraps around" the existing mortgage. This structure can often facilitate the transaction because the buyer can take advantage of possibly favorable terms from the seller's original mortgage, while the seller continues to make payments on their existing loan. This can be beneficial in situations where the existing mortgage has a lower interest rate than current market rates.

Retaining the existing mortgage can also provide the seller with potential advantages, such as saving on prepayment penalties and maintaining favorable terms, while giving the buyer access to real estate without needing to secure a traditional loan from a lender immediately. Thus, this characteristic of allowing the seller to keep their existing mortgage is a vital aspect of how wraparound mortgages function effectively in real estate transactions.