Seller Financing Wraparound Mortgage Calculator
Calculate the net monthly cash flow to the seller on a wraparound mortgage: buyer's wrap payment minus the seller's underlying loan payment. See the arbitrage spread and the balloon payoff math. Free, private.
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What is a wraparound mortgage?
A wraparound mortgage (or wrap, all-inclusive trust deed/AITD) is a seller-financing technique where the buyer makes payments to the seller, and the seller continues to pay their existing underlying mortgage. The new wrap loan "wraps around" the original. The seller earns the interest-rate arbitrage between the rate they charge the buyer (typically 7-9% in 2027) and the rate on their underlying mortgage (often 3-5% if originated before 2022's rate hike cycle).
Wraps make sense when: (1) the seller has a low-rate underlying mortgage they want to keep working, (2) the buyer cannot qualify for a bank loan at acceptable rates, (3) the property is hard to finance conventionally (rural, unusual zoning, or seller wants a quick close). The buyer gets immediate title transfer (unlike contract-for-deed) and can later refinance with a traditional bank.
How the seller makes money — the arbitrage spread
Example math: seller owes $200,000 at 3.5% on a 25-year remaining mortgage (monthly P&I ≈ $1,001). They sell the property for $300,000, take $30,000 down from the buyer, and write a wrap loan for $270,000 at 7.5% amortized over 30 years with a 7-year balloon. The buyer's monthly payment is $1,887. The seller receives $1,887, pays $1,001 on the underlying loan, and pockets $886/month — about $74,000 over 7 years of arbitrage.
At year 7, the balloon: the buyer must pay off the remaining wrap balance (~$248,000) by refinancing with a bank or extending. The seller uses that payoff to retire the underlying loan (balance ~$166,000 at year 7) and keeps the difference ($82,000) as additional profit. Total seller profit over 7 years: $74,000 arbitrage + $82,000 balloon spread + $30,000 down + interest portion of underlying paydown = ~$200,000+ on a $100,000 equity position at sale.
The risks — due-on-sale and buyer default
The biggest risk is the due-on-sale clause in the underlying mortgage. Federal law (Garn-St. Germain Act, 1982) makes due-on-sale enforceable except in specific family-transfer exceptions. A wrap creates a beneficial ownership transfer that the underlying lender can detect via property tax records, insurance changes, or refinance attempts. If discovered, the lender can demand full payoff within 30 days. Sellers accept this risk in exchange for the cash flow; some use a land trust to obscure the transfer (legal but does not eliminate the risk).
Secondary risk: buyer default. If the buyer stops paying, the seller must continue paying the underlying loan to avoid foreclosure on themselves. The seller can then foreclose on the buyer (judicial or non-judicial depending on state). Title returns to the seller, plus all payments made to date are kept. Wraps typically include 30-day cure periods and accelerate the balloon on default.
How to use this calculator
Enter the sale price, the buyer's down payment, the wrap rate (what you charge the buyer), wrap amortization term (typically 30 years even with a 5-10 year balloon), and the balloon year. Then enter your existing mortgage's current balance, rate, and remaining term. The calculator returns: buyer's monthly payment, your underlying payment, your net monthly cash flow, and the balloon payoff math at the chosen year.
Use this when negotiating seller financing: the calculator's "net monthly" figure is the cash flow you'll keep, and the "balloon payoff to seller" line is the lump-sum profit at exit. Compare this to selling outright and investing the cash — the wrap typically wins on total dollars when the underlying rate is materially below the wrap rate, but loses on liquidity and adds default risk.
Source: Garn-St. Germain Depository Institutions Act of 1982, Dodd-Frank SAFE Act, and standard seller-financing practice — updated May 2026. Consult a real estate attorney before structuring a wrap.