How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Flagbridge-ADR Your Own Question
Flagbridge-ADR
Flagbridge-ADR, Arbitrator/Mediator
Category: Legal
Satisfied Customers: 4618
Experience:  Law Degree, New York Bar Exam, Arbitrator/Mediator, Just Answer LEGAL Mentor.
2368596
Type Your Legal Question Here...
Flagbridge-ADR is online now
A new question is answered every 9 seconds

WHAT ARE WRAP AROUND LOANS AND ARE THEY LEGAL IN CALIFORNIA

Customer Question

HAVE SOMEONE WHO WANTS TO PURCHASE A CONDO DOING THIS, IS A LEASE OPTION TO BUY BETTER?
Submitted: 9 years ago.
Category: Legal
Expert:  Flagbridge-ADR replied 9 years ago.
Hello,

Can I clarify, You have a condo that you want to sell, and you want to know if a lease option is a better way to finance it for them?

Cheers
Customer: replied 9 years ago.
Reply to Flagbridge-ADR's Post: need to find out what a wrap around loan is first.
Customer: replied 9 years ago.
I NEED TO KNOW IF THE WRAP AROUND LOAN IS A GOOD CHOICE RATHER THAN LEASING WITH AN OPTION TO BUY???
Expert:  Flagbridge-ADR replied 9 years ago.
Hello,

This depends on the total of the first mortgage and the market price.

It also depends on the value of the property, and what the terms of the lease option are.

How much equity is left in the property for the wrap around?

Cheers
Flagbridge-ADR and 6 other Legal Specialists are ready to help you
Customer: replied 9 years ago.
WE ARE IN CALIFORNIA, THEY PURCHASED THE CONDO 2 YEARS AGO FOR $230K, THEY ARE NOW SELLING AS LOW AS $199K, THEY HAVE AN INTEREST ONLY LOAN FOR 5 YEARS FIXED SO STILL OWE $230K. THE PROPOSED BUYER WANTS TO COME IN AND DO A WRAP AROUND LOAN AND WE ARE NOT SURE WHAT THAT IS AND HOW IT WORKS, THIS IS OUR QUESTION. IT DOESN'T APPEAR THEY WILL MAKE ANY MONEY ON THE SALE BUT THEY WANT TO WALK AWAY AND PURCHASE A HOUSE RATHER THAN A CONDO AS THEY NOW HAVE A BABY.
Expert:  Flagbridge-ADR replied 9 years ago.
A wrap around mortgage is a mortgage on the "equity" that then includes what is owed on the main mortgage. So if they mortgaged the house for 200k, and there is not equity (because they are selling for 200K), they want you to assume their mortgage.

A lease option would be different. You would pay monthly (and into an escrow so the bank receives it) and at any time within xx number of months or years you may purchase the property. A certain percentage of the lease payments would go towards your down payment.

In this scenario you don't own the land. The other party still does, and the other party has the mortgage on it. They may not be able to get a mortgage for a new home.

Another option is get a Vendor take Back. They would sell the house for 200, but they would finance $50k, so you only needed a mortgage from the bank for 150. You own the land, they have a second mortgage on it, and you make two payments a month. One to the bank and one to the old owner.

You MUST talk to a real estate lawyer prior to concluding any of these options. They can be VERY VERY technical and if you are not careful you could end up buying someone else's problem.

If this has helped please click ACCEPT.
Customer: replied 9 years ago.
THANK YOU, XXXXX XXXXX NOW APPRECIATE YOUR HELP.
Expert:  Flagbridge-ADR replied 9 years ago.
Hello,

If I have been of help please click ACCEPT.

If you need more help please let me know.

Regards