How is a wrap-around mortgage beneficial to the seller?

A wrap-around mortgage is beneficial to the seller primarily because it enables the seller to collect interest on the entire amount financed through the mortgage. In this arrangement, the seller maintains their existing mortgage while creating a new wrap-around loan that encompasses both the existing mortgage balance and the additional amount being financed for the buyer.

This structure allows the seller to charge a higher interest rate on the combined wrap-around loan compared to the rate on their existing mortgage, ultimately resulting in increased interest income. The seller can effectively profit from the difference between the interest rate received from the buyer and the rate paid to the lender on their original mortgage, enhancing their cash flow.

In addition to this financial advantage, wrap-around mortgages can facilitate sales in situations where buyers may not qualify for traditional financing, allowing sellers to market their property to a broader audience. However, while these aspects contribute to the appeal of this arrangement, the primary benefit that stands out is the capacity for the seller to earn interest on the full sum involved in the transaction.