A typical wrap around mortgage is when a borrower sells a house to buyer, and the buyer is responsible for paying the first mortgage. In many cases, the seller takes the payments from the buyer and pays the first mortgage directly.
For example, Joe has a mortgage on his house with First National Bank for $10,000, payable in $100 monthly payments. Joe then sells his house to Jessica for $12,000, for $120 monthly payments. Jessica puts no money down. Jessica is making payments to Joe for $120 per month. Joe, in turn, pays the $100 per month to First National Bank, and keeps the extra $20 per month.
Most of these scenarios violate the “due on sale” provisions contained in most Texas residential mortgages.
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