Structure a Wrap-Around Mortgage and Calculate Your Monthly Spread
Structure a "wrap" deal where the buyer's new loan wraps around your existing mortgage. Calculate your monthly cash flow spread, interest arbitrage, and total deal profitability.
| # | Date | Wrap Payment | Principal | Interest | Balance | Monthly Spread |
|---|---|---|---|---|---|---|
| Calculate to see schedule | ||||||
How to Use the Wrap-Around Mortgage Calculator
Modeling a wrap deal has four moving parts: the existing loan, the new wrap terms, the monthly spread, and the amortization. Follow these five steps and the calculator handles all the math in real time.
Enter Your Existing Loan Details
Input the current outstanding balance, interest rate, and monthly P&I payment on the mortgage you’ll be wrapping. These numbers come directly from your most recent mortgage statement. The existing payment is what you’ll continue paying to the original lender — it’s your primary cost in the deal and determines the floor of your spread.
Set the Sale Price & Down Payment
Enter the agreed purchase price and the down payment the buyer will bring to closing. The wrap loan amount is automatically calculated as the difference. Use the percentage slider to quickly model higher or lower down payment scenarios — a larger down payment reduces the wrap loan size and the buyer’s monthly payment, but also lowers the seller’s total interest income over time.
Choose the Wrap Rate & Amortization Term
Enter the interest rate the buyer will pay on the wrap loan — typically 1–3% above current conventional rates. Use the rate slider to see how each increment affects your monthly spread in real time. Then set the amortization term (usually 30 years). Unlike balloon-term seller financing, wrap deals are commonly amortized over the full term with the buyer eventually paying off the original underlying loan through the wrap payments.
Calculate & Analyze Your Spread
Click “Calculate Spread” to instantly see your net monthly cash flow, the interest rate arbitrage, full debt structure, LTV, and annual cash flow. The hero card turns green for a profitable spread or red if the numbers don’t work — helping you quickly identify deals worth pursuing. Six summary metric cards give you the complete picture at a glance.
Download the PDF Deal Report
Click “Download PDF” to generate a professional two-page wrap loan analysis — the same deal report you can share with your real estate attorney, a co-investor, or a hard-money partner. Page 1 covers the full deal structure and visual charts. Page 2 provides the complete wrap loan amortization schedule with every payment’s principal, interest, balance, and monthly spread — all color-coded for clarity.
What This Calculator Shows You
A wrap deal has more moving parts than a standard seller-finance note. This calculator surfaces every number both parties need — before anything is put in writing.
Net Monthly Cash Flow (Spread)
The seller’s monthly profit: what the buyer pays on the wrap minus what the seller pays to the original lender. This is the core metric in any wrap deal — the arbitrage that makes the structure attractive. A positive spread means profit; a negative spread means the deal is structured backward and must be renegotiated.
Interest Rate Arbitrage
The percentage-point difference between the buyer’s wrap rate and the seller’s existing rate — displayed to three decimal places. A seller with a 3.5% mortgage who wraps at 6.5% captures a 3.0% arbitrage on the entire wrap loan balance. Over a 30-year term on a $300,000+ wrap, this spread can generate hundreds of thousands of dollars in additional income versus a conventional sale.
Wrap Payment vs. Underlying Payment
The proportional bar chart shows exactly what the buyer pays in, what the seller pays out, and the net spread remaining. These three numbers are shown side by side in both bar-chart and text form, making it instantly clear whether the deal’s cash flow structure makes sense and how wide the margin is between income and cost.
Debt Structure & Seller Equity
The donut chart and summary cards show the full capital stack: existing underlying debt (what the original lender is owed), seller equity in the note (the difference between the wrap loan and underlying balance), and cash received at closing. This picture tells the seller exactly what security they hold and what their exposure is if the buyer defaults.
LTV & Annual Cash Flow
Loan-to-value (LTV) on the wrap loan shows the buyer’s equity position and the seller’s risk exposure — a higher LTV means less buyer equity and greater seller risk. Annual cash flow (monthly spread × 12) helps sellers evaluate the deal as a yield investment and compare it to alternatives like selling conventionally, holding as a rental, or structuring a standard seller-carry note.
Full Wrap Loan Amortization Schedule
Expand the accordion to see a complete month-by-month schedule for the wrap loan — every payment’s date, principal portion, interest portion, remaining balance, and the monthly spread. The spread column is color-coded green for positive and red for negative, making it immediately clear whether a given rate combination works over the full term.
Key Benchmarks for Wrap-Around Mortgage Deals
The Due-On-Sale Clause: The Primary Risk in Every Wrap Deal
Due-On-Sale Clause Can Accelerate the Entire Underlying Loan
Virtually all conventional mortgages originated after 1982 contain a due-on-sale clause that allows the lender to demand immediate repayment of the full outstanding balance when the property is sold or transferred. A wrap-around mortgage typically transfers title (or equitable interest) to the buyer while the seller’s original mortgage remains in place — which can technically trigger this clause. If the lender discovers the transfer and exercises their right, the full underlying balance becomes immediately payable. Always engage a licensed real estate attorney in your state before structuring any wrap transaction. Some investors mitigate this risk using a land trust or by working with portfolio lenders that don’t enforce due-on-sale strictly — but there is no risk-free workaround for loans held by institutional servicers.
Common Wrap-Around Deal Structures
“Wrap-around mortgage” describes a category of financing, not a single contract type. The underlying cash flow math is identical across all structures — which is why this calculator applies to all of them.
The buyer receives a deed of trust (mortgage) that includes — “wraps around” — the seller’s existing first mortgage. The buyer pays the seller one payment on the AITD; the seller uses part of it to pay the original lender. Common in California and western states. The AITD is recorded in public records, and a licensed escrow company typically handles payment disbursement. Title transfers to the buyer at closing.
Functionally identical to the AITD but documented as a traditional mortgage instrument rather than a deed of trust. More common in eastern U.S. states where mortgage (rather than trust deed) states dominate. The buyer receives a new mortgage from the seller that wraps the seller’s underlying loan. The seller is simultaneously borrower to the original lender and lender to the buyer. Same payment flow and arbitrage mechanics — only the legal document form differs.
The buyer takes title to the property “subject to” the existing mortgage — meaning the mortgage remains in the seller’s name — while simultaneously signing a separate promissory note to the seller for the equity portion. The seller receives a higher rate on their equity note and also benefits because their underlying mortgage is being paid by the buyer. The cash flow spread in the calculator models the equity note portion in this structure.
The seller retains legal title while the buyer holds equitable title, making monthly payments as in a standard land contract — but the seller’s existing mortgage is being serviced from those payments. Because the seller never legally transfers title until the loan is paid off, due-on-sale risk is theoretically lower, but state laws vary significantly on whether this constitutes a “transfer” triggering the clause. Legal review is still essential before using this structure.
When the underlying loan is held by a portfolio lender — a community bank, credit union, or private lender that originates and holds its own loans rather than selling them to Fannie or Freddie — enforcement of the due-on-sale clause is entirely at the lender’s discretion. Many portfolio lenders will consent to a wrap or simply not enforce the clause if the payments remain current. Identifying whether the underlying loan is a portfolio loan is often the first step in evaluating wrap feasibility.
Wrap Mortgage vs. Standard Seller Financing vs. Subject-To
These three creative financing tools are often confused. Each has distinct payment mechanics, risk profiles, and legal requirements that affect which structure fits a given deal.
| Feature | Wrap-Around Mortgage | Standard Seller Finance | Subject-To |
|---|---|---|---|
| Who holds existing mortgage? | Seller (stays in place) | None required | Seller (stays in place) |
| Monthly payment flow | Buyer → Seller → Original lender | Buyer → Seller (no bank) | Buyer → Seller → Original lender |
| Seller’s rate arbitrage profit? | Yes — core feature | No — seller sets rate freely | Partial — depends on structure |
| Due-on-sale risk | Yes — title transfers | No existing mortgage to trigger | High — title transfers, loan stays |
| Buyer’s credit required? | Negotiable — set by seller | Negotiable — set by seller | Often none — buyer assumes existing loan |
| Best when seller has… | Low existing rate (big arbitrage) | Free & clear or paid-off property | Low-rate assumable-style loan |
| Attorney required? | Yes — always | Yes — strongly recommended | Yes — always |
| Third-party loan servicing? | Strongly recommended | Recommended | Strongly recommended |
| What this calculator models | ✓ Designed for this | Use Seller Finance Calculator | Use wrap inputs for equity note portion |
Which tool to use: If you’re structuring a standard seller-financed note with no existing mortgage, use the Seller Financing Calculator. If you’re modeling a conventional mortgage payment, use the Mortgage Payment Calculator. This Wrap Calculator is built specifically for deals where the seller’s existing below-market mortgage creates a cash flow spread.
How Different Parties Use This Calculator
The numbers you care about depend on which side of the deal you’re on — and whether you’re evaluating it before or after finding a partner.
Property Sellers
Capturing the rate spreadYou bought or refinanced at a low rate and now face a market where conventional buyers can’t pay your price and conventional lenders charge 7%+. A wrap lets you sell at full price, collect a monthly spread, and exit on your timeline.
- The lower your existing rate vs. today’s market, the bigger your arbitrage spread
- Model your LTV — keep it below 80% for adequate buyer equity protection
- Higher down payment = lower risk if the buyer defaults
- Run the annual cash flow figure against what you’d net from a conventional sale
- Download the PDF and share with your attorney before any buyer conversation
Real Estate Investors
Arbitrage deal-makersYou’re sourcing motivated sellers with low-rate mortgages and structuring wraps as investment vehicles — either holding for cash flow or assigning deals to buyers. Speed and precision in your deal analysis determines your edge.
- Use the rate slider to identify the minimum wrap rate that hits your target spread
- Run multiple scenarios: 5%, 10%, 20% down to see how it shifts the numbers
- Annual cash flow card tells you your yield as a percentage of down payment
- The amortization table shows when the wrap loan’s balance crosses key LTV thresholds
- PDF report is a clean deal memo you can share with partners or hard-money lenders
Creative Finance Buyers
Accessing below-market financingYou can’t qualify for a conventional mortgage today, or you’re a sophisticated buyer who wants to access a seller’s existing low-rate loan rather than originate a new one at current market rates. A wrap can give you financing that a bank won’t.
- Your wrap rate is typically still below what a bank would charge today — that’s the value
- Insist on third-party loan servicing to protect against seller default on the underlying
- Use the amortization schedule to track your balance and equity growth month by month
- Ask your attorney about land trust structures that reduce due-on-sale exposure
- The PDF gives you a full payment history template to show future lenders
7 Things to Know Before Structuring a Wrap-Around Mortgage
Wraps are one of the most powerful tools in creative real estate finance — and one of the most legally complex. These practical considerations apply to every wrap deal, regardless of structure or state.
Verify the Underlying Loan Type Before Structuring Anything
Not all mortgages are created equal when it comes to wrap risk. Conventional Fannie/Freddie loans have strict, actively-enforced due-on-sale clauses. FHA loans have a due-on-sale clause but are also assumable — creating a different legal path. VA loans are assumable under specific conditions. Portfolio loans (held by community banks and private lenders) may have more flexible due-on-sale language. Before doing any deal analysis, pull the original mortgage note and confirm who holds the loan and what the due-on-sale language actually says.
Always Use a Licensed Real Estate Attorney — In Your State
Wrap-around mortgage law varies significantly by state. Some states have specific statutes governing wrap transactions, disclosure requirements, and remedies in case of default. Others treat them entirely under general contract and mortgage law. An attorney licensed in the state where the property is located — not just any real estate attorney — must draft the wrap note, deed of trust or mortgage, and any ancillary agreements. The cost ($1,000–$3,000) is trivial compared to the cost of a defective instrument or an undisclosed legal risk.
Use a Third-Party Loan Servicing Company
The buyer’s single biggest risk in a wrap is the seller defaulting on the underlying mortgage while still collecting the buyer’s payments. A licensed loan servicer receives the buyer’s payment, pays the underlying lender first (with proof), and remits the spread to the seller. This protects both parties: the buyer is protected from seller default, the seller gets automatic accounting records, and the arrangement demonstrates good faith if the transaction is ever questioned. Cost: $25–$75/month. Non-negotiable in any professionally structured wrap deal.
Calculate Your Real Yield — Not Just the Monthly Spread
The monthly spread is a gross figure. To understand the real return, sellers should account for: loan servicing fees ($25–$75/month), attorney setup costs amortized over the term, the opportunity cost of holding the note versus a lump-sum conventional sale, and potential carrying costs if the buyer defaults and foreclosure is needed. Divide the annual net spread by the equity you’re holding in the deal (sale price minus down payment minus existing loan) to get your true annualized yield — then compare it to alternatives.
Require a Meaningful Down Payment for Risk Protection
The down payment serves two purposes in a wrap: it’s the seller’s immediate cash at closing, and it’s the equity buffer protecting the seller if the buyer defaults and the property must be foreclosed and resold. A buyer with 5% down has almost no equity stake — if prices dip, they may walk away. A buyer with 20% down has a significant financial incentive to keep paying. Model multiple down payment scenarios in this calculator and compare the LTV figure before deciding what minimum to accept.
Include a Formal Default and Remediation Clause
The wrap note must specify what happens when the buyer misses a payment — notice period, cure period, acceleration rights, and the seller’s remedy (typically non-judicial foreclosure via the trust deed, or judicial foreclosure via the mortgage). It should also address what happens if the seller fails to make the underlying payment — the buyer should have the right to make that payment directly and deduct it from amounts owed to the seller. A well-drafted default clause protects both parties and reduces the cost and ambiguity of any future dispute.
Plan Your Exit Strategy Before You Close
A wrap is not a forever structure. Both parties need to understand how it ends: the buyer eventually refinances and pays off the wrap (the most common exit), the property is sold again and proceeds pay off both the wrap and the underlying loan, the wrap note is sold to a note investor (at a discount), or the loan is renegotiated if market conditions change. Model the balloon date if you’re using a short balloon term, or use the amortization schedule to identify when the buyer is likely to have enough equity to refinance conventionally. Build the exit into the deal from day one.
Wrap-Around Mortgage Calculator FAQ
Plain-language answers to the questions buyers, sellers, and investors ask most about wrap deals.
Important disclaimer: All calculations provided by this tool are for educational and estimation purposes only and do not constitute financial, legal, or real estate advice. Wrap-around mortgages are complex financial instruments that may trigger due-on-sale clauses, violate the terms of existing loan agreements, or be subject to state-specific regulations. Results are based entirely on the inputs you provide and standard fixed-rate amortization mathematics. This calculator does not model due-on-sale risk, lender enforcement likelihood, tax consequences, loan servicing costs, default remedies, or state-specific legal requirements. Any wrap-around mortgage transaction must be reviewed and documented by a licensed real estate attorney in the state where the property is located before any agreement is signed. HomeExpertly is not a lender, broker, financial advisor, or attorney.