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Can you use a wrap-around mortgage deed in Tennessee?

Can you use a wrap-around mortgage deed in Tennessee?

Q: Do banks allow wrap-around mortgages?

Banks typically do not offer wrap-around mortgages as a standard product. However, if the original mortgage does not have a due-on-sale clause, sellers and buyers can negotiate this arrangement privately. It's essential for both parties to understand the risks involved and consult legal advice before proceeding.

Q: Who holds title in a wrap-around mortgage?

In a wrap-around mortgage, the seller typically retains the title to the property while the buyer makes payments on the new mortgage. The seller remains responsible for the original mortgage, but the buyer has equitable interest in the property. This arrangement should be clearly documented to protect both parties' interests.

Full question:

I would like to know if one can use a wrap-around mortgage deed in TN?

Category: Real Property
Subcategory: Foreclosure
Date: 04/07/2025
State: Tennessee

Answer:

A wrap-around mortgage is recognized in Tennessee. This type of loan transaction involves a lender, often the seller of the property, who takes on an existing mortgage and creates a new mortgage for an additional amount. This new mortgage 'wraps' around the old mortgage, meaning the lender will make payments on the original loan.

According to Tennessee law, specifically Tenn. Code Ann. § 47-28-101, the term 'mortgage' includes a mortgage, deed of trust, or other real property conveyances that secure obligations, excluding instruments that create or perfect a security interest in fixtures that do not include other real property.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Which clause in the mortgage will generally not allow for wraparound mortgages?

The due-on-sale clause is a common provision in mortgages that can prevent wrap-around mortgages. This clause allows the lender to demand full repayment of the loan if the property is sold or transferred, which can complicate the wrap-around arrangement. If the original mortgage includes this clause, the seller may not be able to create a wrap-around mortgage without risking foreclosure on the original loan.

Do banks allow wrap-around mortgages?

Is a wraparound mortgage due-on-sale clause?

A wrap-around mortgage can trigger a due-on-sale clause in the original mortgage. This clause allows the lender to call the loan due if the property is sold or transferred. If the original mortgage has this clause, the seller should be cautious when entering a wrap-around agreement, as it could lead to foreclosure if the lender enforces the clause.

What is a wraparound clause?

A wraparound clause refers to a provision in a wrap-around mortgage agreement that outlines the terms under which the new mortgage 'wraps' around the existing mortgage. It specifies how payments are handled and the responsibilities of both the seller and buyer. This clause is crucial for clarifying the relationship between the original and new mortgages.

Why would someone do a wrap-around mortgage?

A wrap-around mortgage can be beneficial for buyers who may not qualify for traditional financing. It allows them to purchase a property while the seller retains the original mortgage. This arrangement can also provide the seller with a steady income stream from the mortgage payments, often at a higher interest rate than the original loan.