Owner Finance Wrap Mortgage 2027 Cash Flow Calculator

A wrap-around mortgage (All-Inclusive Trust Deed / AITD) lets a seller with a low-rate underlying loan sell to a buyer at a higher rate, keeping the spread as monthly profit. The seller stays on the original loan; buyer makes payment to seller, who continues paying the original lender. 2027 attractive when sellers have 3-4% legacy loans and buyers face 7-8% market rates. Risk: due-on-sale clause activation. Source: Garn-St. Germain Act 1982, RE/MAX Wrap Survey 2026.

How Wrap Mortgages Work in 2027

Seller has existing low-rate loan (e.g., 3.5%, $220k balance). Seller sells property to buyer at $380k with $30k down. Seller takes a $350k note from buyer at 8.5%. Seller continues paying the original 3.5% lender; buyer pays seller. The $5% rate spread on $350k = $14k/year spread profit. Plus seller keeps any net equity ($130k in this example) as note principal.

The Due-On-Sale Risk

Most conventional mortgages contain a 'due-on-sale' clause: lender can demand full payoff if title transfers. Garn-St. Germain Act 1982 (12 USC §1701j-3) lists specific exceptions (inter vivos trust, spouse, junior lien) but a wrap-around sale to an unrelated buyer is NOT exempt. In low-rate environments, lenders rarely enforce (no upside for them). In high-rate environments, lenders aggressively scan title for transfers and call loans.

Servicing and Title Protections

Best practice: (1) Use third-party loan servicer (FCI, Land Home, North American Servicing) to collect from buyer and pay underlying lender — creates paper trail and protects both sides. (2) Hold title in a land trust where seller remains beneficiary — title doesn't show transfer. (3) Buyer gets equitable title via Contract for Deed or AITD. (4) Always have RE attorney draft documents; never use generic templates from internet.

Last updated May 2026. Sources: Garn-St. Germain Act 1982 (12 USC §1701j-3), RE/MAX Wrap Survey 2026.