Which arrangement involves the seller financing the buyer's purchase while the original loan remains in place?

Which arrangement involves the seller financing the buyer's purchase while the original loan remains in place?

• A. Wraparound Mortgage
• B. Subject to Loan
• C. Exculpatory Clause
• D. Recourse Clause

Answer: (A)

Wraparound mortgage is a seller-financing setup where the seller keeps the existing loan in place and provides a new loan to the buyer that “wraps around” the original mortgage. The buyer signs a note with the seller for the purchase price, and the payments the buyer makes go to the seller, who then uses part of those payments to continue paying the original loan. The original loan stays in the seller’s name, and the lender is still secured by the property, while the new wraparound loan becomes the buyer’s obligation. This arrangement lets the seller finance the sale while the original financing remains active, though it carries risk for the seller if the buyer defaults since the seller remains liable on the original loan and must manage both payments. Other terms aren’t about financing structures: a subject-to loan also involves the seller’s loan staying in place but without a new wraparound note, and exculpatory or recourse clauses deal with liability or remedies rather than how the financing is arranged.

Wraparound mortgage is a seller-financing setup where the seller keeps the existing loan in place and provides a new loan to the buyer that “wraps around” the original mortgage. The buyer signs a note with the seller for the purchase price, and the payments the buyer makes go to the seller, who then uses part of those payments to continue paying the original loan. The original loan stays in the seller’s name, and the lender is still secured by the property, while the new wraparound loan becomes the buyer’s obligation. This arrangement lets the seller finance the sale while the original financing remains active, though it carries risk for the seller if the buyer defaults since the seller remains liable on the original loan and must manage both payments. Other terms aren’t about financing structures: a subject-to loan also involves the seller’s loan staying in place but without a new wraparound note, and exculpatory or recourse clauses deal with liability or remedies rather than how the financing is arranged.