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Wrap-around mortgage calculator

Monthly spread, equity gap, balloon math, and net interest to the seller.

Existing (underlying) loan
$
%
yr
$
Auto: $1,284. Set a value to override.
The wrap
$
$
6.7% of sale price
%
yr
yr
Set 0 for none.
Wrap-around mortgage — seller view
Buyer pays seller
$2,447
Monthly P&I on wrap note
Seller pays underlying
$1,284
4.25% for 22 yr
Monthly spread
$1,163
Kept by seller each month
Wrap note amount
$350,000
Equity spread
$130,000
Wrap minus underlying
Effective annual return
10.74%
Spread ÷ seller equity in deal
Buyer owes at yr 5
$331,161
Balloon due to seller
Seller still owes at yr 5
$186,308
On the underlying loan
Loan balances over time — shaded area is the equity spread
Interest over the hold period (5.0 yr)
Collected on wrap
$127,996
Paid on underlying
$43,356
Net interest to seller: $84,640 over the hold, plus $25,000 received at closing.
Caution — not legal advice
Wrap-arounds usually trigger the due-on-sale clause in the underlying mortgage, meaning the lender can call the entire loan due upon transfer. Rules also vary by state (some ban them outright for owner-occupied deals). Use a licensed real estate attorney to paper the note and deed of trust, and a licensed servicer to collect payments and pay the underlying lender.
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How this works

A wrap-around mortgage is a new seller-financed loan that 'wraps' the seller's existing mortgage — the buyer pays the seller each month, and the seller continues paying the original lender, keeping the interest-rate spread.

In a wrap, the seller keeps their existing loan in place and gives the buyer a new, larger note that "wraps around" it. The buyer pays the seller each month; the seller pays the underlying lender. The difference is the monthly spread.

Worked example

Underlying: $220,000 at 4.25%, roughly $1,284/mo. Sale $375,000, buyer puts $25,000 down. Wrap note is $350,000 at 7.5% amortized over 30 yr → $2,447/mo from the buyer. Spread ≈ $1,163/mo.

Effective return = annualized spread ÷ equity the seller still has in the deal (wrap note − underlying balance). Here: ($13,957 ÷ $130,000) ≈ 10.74%. The seller also earns the full spread between rates on the underlying balance itself.

A balloon forces the wrap balance due after N years — buyer refinances or sells. At that same date, the seller still owes whatever remains on the underlying loan and pays it off from the balloon proceeds.

Common questions