Wrap-around mortgage financing is the perfect solution for you if your business has a little business credit history. Most lenders won’t give large commercial loans, or small business loans for that matter, to businesses with little or no credit history. You can avoid that problem with a Wrap-Around Mortgage because you purchase the property directly from the seller instead of going through a regular lender like a bank.
The seller would act as the lender and benefits because you pay them a set monthly fee which includes their current mortgage payment, the predetermined monthly rate for the property, and it includes the interest charged by the lender. The lender, or seller, will typically offer the property at a little higher interest than what they are currently getting so they benefit from the transaction.
It is extremely important to get an agreement in place before proceeding with a Wrap-Around Mortgage. Having a lawyer review the agreement will be beneficial to both parties involved and protects everyone. It is also important to determine what the laws are in your state considering these types of mortgages. Some states do not allow them.
In a Wrap-Around Mortgage, the buyer does not get ownership of the property. Instead, it remains in the name of the seller. This is different than an installment sales contract. It is a creative way to allow a buyer to purchase property without having to qualify for a loan or to pay closing costs. The contract is made between the buyer and seller with the seller remaining on the original mortgage and title.
Wrap-Around Mortgage is an excellent way for a start-up business to get access to the property they would typically have to wait months to obtain.