### What is a Wraparound Mortgage primarily used for? - [x] Allowing the seller to provide a mortgage to the buyer - [ ] Providing government-backed mortgage insurance - [ ] Funding home improvements for existing homeowners - [ ] Refinancing existing loans at lower interest rates > **Explanation:** A wraparound mortgage allows the seller of a home to provide financing to the buyer, adding the remaining balance of the seller's existing mortgage to the new loan given to the buyer. This arrangement makes it easier for the buyer to acquire the home, especially when conventional financing is difficult to obtain. ### In a Wraparound Mortgage, who makes the payment to the original lender? - [ ] The borrower directly - [ ] A third-party mortgage company - [ ] The local municipal authority - [x] The seller > **Explanation:** In a wraparound mortgage arrangement, the borrower makes one monthly payment to the seller. The seller then uses part of that payment to make the required payments on the original mortgage, keeping the remaining portion as profit, usually due to the higher interest rate on the wraparound mortgage. ### Why might a seller find a Wraparound Mortgage attractive? - [ ] It increases the value of the property - [x] It typically offers a higher yield due to a higher interest rate - [ ] It allows for government subsidies - [ ] It shortens the loan repayment period significantly > **Explanation:** Sellers often find wraparound mortgages attractive because they can typically charge a higher interest rate compared to the existing mortgage, providing a higher yield. This can generate additional income for the seller while facilitating the sale of the property. ### What risk is associated with using a Wraparound Mortgage on a non-assumable loan? - [ ] The interest rate may fluctuate - [ ] The borrower might face legal penalties - [x] The original lender might call the loan, requiring full repayment - [ ] The property might be foreclosed > **Explanation:** When the primary mortgage is a non-assumable loan, there is a risk that the original lender might not agree to the new arrangement. If they do not consent, they could call the loan, requiring it to be paid in full immediately, which poses a significant risk for both seller and buyer. ### What type of existing loans are typically involved in Wraparound Mortgages? - [ ] Home equity loans - [ ] Personal unsecured loans - [x] Assumable loans - [ ] Student loans > **Explanation:** Wraparound mortgages are most commonly used when the existing loan on the property is an assumable loan. Assumable loans allow the new borrower to take over the original borrower’s mortgage under the same terms, which makes these loans ideal for wraparound arrangements. ### How is the amount of a Wraparound Mortgage determined? - [x] By adding the existing loan amount to the new borrowed amount - [ ] By using the home's market value plus a premium - [ ] By subtracting the home's depreciated value from the loan amount - [ ] By using only the new borrowed amount > **Explanation:** The total wraparound mortgage amount is calculated by adding the remaining balance of the existing mortgage to the new amount that is being financed. This creates a single loan that the borrower pays to the seller. ### What are Wraparound Mortgages typically used for? - [ ] Shortening loan terms - [ ] Flipping properties - [x] Facilitating home sales - [ ] Combining multiple loans into one > **Explanation:** Wraparound mortgages are primarily used to facilitate the sale of a home, allowing buyers who may not qualify for traditional financing to purchase a property and making it attractive for sellers by offering higher returns. ### Who benefits from the higher interest rate in Wraparound Mortgages? - [ ] The original lender - [x] The seller - [ ] The buyer - [ ] The real estate agent > **Explanation:** The seller benefits from the higher interest rate on the wraparound mortgage. This higher rate leads to a higher yield from the loan, making it an attractive option when selling the home.