One thing missing:  most loans have a "Due On Sale" clause.  The Seller can offer a second mortgage, but if the existing first mortgage is not assumable, that lender will probably accelerate the principal balance (demand that the loan balance be paid in full).

  Caveat about wraps:

     Many "Get Rich Quick in Real Estate Investing" courses suggest the wrap-around mortgage.  They may propose ways to circumvent the due-on-sale clause.  Don't do it!  If there is a due-on-sale clause, and you don't intend to pay off the principal balance, get legal advice from a real estate attorney.  You can also approach the Lender about assuming an existing mortgage.  

In a wraparound, the buyer pays the payment on the seller's note, plus more to the seller till the note is paid off and then just what is owed seller till paid in full.

OK so I have 100k financed at 500/mo. You want to buy the property for 200k.

So you're gonna pay 1000/month, 500 to apply to my mortgage payment and the other 500 to me for me. Once the original mortgage is paid off, you just pay me the 500 (or whatever is structured, the payment at that point could increase or be ADAP which is all due and payable) until I am paid in full.

Wraparound is often also called an all inclusive note and DOT!

The seller REMAINS RESPONSIBLE for the payments on the original note in the event of buyer default . . . so you need a note servicer who receives the monthly payments and then disburses to the lender in seller's name and to seller.

The lender is getting payment in seller's name as always . . . 

You are missing an instructor to actually teach you and the absence of questions that provide enough detail to get the answer correct. Welcome to the world of real estate training.  

A wrap around was not a good thing to do even 30 years ago.

It was ONLY in the dark ages and ONLY if the lender gave freely assumable mortgages...which they stopped doing more than a dozen years ago.

Your instructor needs to get in the 2020 options...it is NOT a wrap around.

Fred Griffin Tallahassee Real Estate correctly used that dirty word "due on sale clause"...that means if the property is sold, the mortgage must be paid off.

Eve

Plenty of others have answered the question.  Presumably, you are studying for the state exam, otherwise you wouldn't be doing multiple choice questions.  Check out my video on my tips for passing.  

I teach in Florida, so my video is designed for the Florida test, but it's generic enough that these tips probably apply to Utah.  Good luck.

what you are missing is does Jill have a mortgage?  Does said mortgage have a due on sale clause?  Generally you have to own free and clear to do owner financing.  Wraparound mortgages just really don't happen in the real world much anymore.  And perhaps the "equity" Jill had wasn't enough to pay off her mortgage thus it was a wraparound.

I have not seen a residential mortgage without a due on sale clause since the 1970's. Therefore a wraparound mortgage is in violation of the primary lien. While it is a vehicle in the technical sense, proceed carefully or foreclosure proceedings will follow!

Hmm...that is one of those terms that I learned in school and haven't since heard, Rodney!

I have never had a seller-financed sale so, I'm not of any help on this one for you.

Now that you have some idea what a wraparound loan in, I suspect that you will never have a transaction that includes that type of financing.

This is really a dumb question. I think parts are missing here.

She can carry back a second secured by the property in real life but in questionland, wraparound seems to match-up. Yes, she makes the payments

Purchase money loan is when a willing buyer gets a mortgage to buy real estate not to get cash out of equity of property currently owned.

Wrap around mortgage is a dumb idea- the buyer doesn't payoff the existing mortgage which has a clause saying this is not allowed. The buyer makes monthly payments to the seller and the seller pays the exisiting mortgage, The deed is changed into new buyer's name thus triggering information to the existing lender.

When Jill sells her home the buyer pays off the existing loan and gets a new loan or pays cash. After Jill sells she gets the cash equity

in my opinion you'd have to know the amount of original mortgage and amount of equity to know.  what was the entire question?

Rodney,

You have good answers from the members here.  I have nothing to add, except when you get your license make sure you find a live mentor who really knows their stuff.  On line is not the ultimate right answer...There is nothing like a live human...A