Wraparound Mortgage

Wraparound Mechanics

Existing senior mortgage stays in place; buyer signs a new wrap mortgage to the seller for the full purchase price (or purchase price minus down payment); buyer makes monthly payments to seller at the wrap rate; seller makes the senior mortgage payment from the wrap payment and keeps the spread; on full payoff, the senior is satisfied and the wrap is released.

When Wraps Make Sense

When the existing senior mortgage carries a materially below-market rate; when the senior mortgage is non-assumable but has no due-on-sale enforcement risk (uncommon — most CRE seniors have enforceable due-on-sale clauses); when seller-side capital gains can be deferred via installment sale treatment; when the buyer cannot qualify for new senior financing at attractive terms.

The Due-on-Sale Problem

Most commercial mortgages contain a due-on-sale clause that allows the senior lender to accelerate the loan upon transfer of the property. A wrap structure transfers beneficial ownership without paying off the senior — if the senior lender enforces the due-on-sale clause, the wrap collapses. Wraps work in practice when senior lenders cannot or will not enforce — rare in institutional CRE.

Wraparound Mortgage Spread Calculator

A Worked Florida Example

An owner sells a small Ocala retail building for $1.2 million. It still has a $600,000 first mortgage at 4%. The buyer puts $120,000 down, and the seller carries a $1.08 million wraparound mortgage at 7%. The buyer pays the seller interest on $1.08 million; the seller keeps paying the original 4% loan. In year one, the seller collects $75,600 of interest and pays $24,000, a $51,600 spread, about a 10.75% return on its $480,000 of equity in the note. The catch: most commercial loans have a due-on-sale clause, so the original lender's consent is essential. Hypothetical figures; not legal advice.

Run the Numbers

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When should you use a wraparound mortgage?

When a seller has a low-rate loan, the buyer can't get conventional financing quickly, and the existing lender consents. It can help both sides, but only with the due-on-sale risk addressed.

How does the seller make money on a wrap?

By charging the buyer a higher rate on the full wrap balance than the seller pays on the underlying loan, earning the spread.

What is the biggest risk of a wraparound mortgage?

The underlying lender calling the loan under its due-on-sale clause, and the seller failing to pay the underlying loan even though the buyer pays the seller.

What is a wraparound mortgage?

A junior mortgage in which the new lender (typically the property seller in a seller-financed transaction) makes payments on the underlying senior mortgage from a combined payment received from the buyer. The wrap "wraps around" the existing senior debt rather than paying it off.

Are wraparound mortgages legal in Florida?

Yes — wraparound mortgages are legal under Florida law, but virtually every institutional commercial mortgage contains a due-on-sale clause that allows the senior lender to accelerate on a wrap. Wraps in commercial CRE are rare today; most uses involve owner-financed transactions where the senior has special circumstances.

What is the advantage of a wraparound mortgage?

For the buyer: financing at a blended rate that may beat market when the underlying senior carries a below-market rate. For the seller: deferred capital gains via installment sale treatment, and ongoing yield from the wrap spread.

What is the risk of a wraparound mortgage?

Due-on-sale enforcement by the senior lender (which collapses the wrap), seller default on the underlying senior payment (which puts the buyer at risk), and complex foreclosure and intercreditor scenarios if either layer defaults. Wraps require sophisticated legal documentation.

Article Summary

Wraparound Mortgage is a foundational commercial real estate concept that Florida investors, owners, and tenants encounter routinely. A wraparound mortgage is a junior loan in which the new lender makes payments on the underlying senior mortgage from a single combined payment received from the borrower — used in seller-financed transactions to allow buyer financing without paying off existing favorable senior debt. Michael R. Linton at Linton Global Solutions applies Wraparound Mortgage to every Florida CRE transaction across multifamily, office, industrial, retail, hotels, NNN, distressed, and 1031 exchange execution — backed by 39 years of closed deal experience and REOMind.ai-powered analytics.

Key Takeaways

• ✓A wraparound mortgage is a junior loan in which the new lender makes payments on the underlying senior mortgage from a single combined payment received from the borrower — used in seller-financed transactions to allow buyer financing without paying off existing favorable senior debt.
• ✓Wraparound Mortgage is relevant across virtually every Florida commercial real estate asset class.
• ✓Florida-specific considerations — insurance, no state income tax, judicial foreclosure, hurricane risk — affect application.
• ✓Michael R. Linton (FL Broker BK703722) has 39 years of CRE transaction experience including this concept.
• ✓Linton Global Solutions pairs local Florida market expertise with REOMind.ai's AI-driven analysis.
• ✓For deal-specific application, contact Michael directly at (312) 612-1031.

About Michael R. Linton

Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39 years in commercial real estate, first in Chicago and now in Florida, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.

Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving a network of banks.

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Works Cited

1. Internal Revenue Service. "Tax Information for Real Estate Investors." IRS, https://www.irs.gov/. Accessed Oct 14, 2026.
2. Florida Department of Business and Professional Regulation. "Florida Real Estate Commission." Florida DBPR, https://www.myfloridalicense.com/. Accessed Oct 14, 2026.
3. NAIOP Commercial Real Estate Development Association. "NAIOP Research." NAIOP, https://www.naiop.org/. Accessed Oct 14, 2026.
4. Urban Land Institute. "ULI Research Library." ULI, https://americas.uli.org/research/. Accessed Oct 14, 2026.
5. Mortgage Bankers Association. "Commercial & Multifamily Research." MBA, https://www.mba.org/. Accessed Oct 14, 2026.

Disclosure & Compliance

Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.

Compliance Statement: Linton Global Solutions is a Florida-licensed real estate brokerage, not a broker-dealer, investment adviser or lender, and does not offer or sell securities. CREDDS and REOMind.ai provide decision support only. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.