What is the primary feature of a wraparound loan?

A wraparound loan primarily functions by incorporating an existing mortgage within a new, larger loan. In this arrangement, the new mortgage is indeed placed in a secondary position relative to the original loan. This means that the new lender is provided with a portion of the mortgage payments made by the borrower, which encompasses the amount of the existing mortgage plus any additional financing the borrower requires.

This structure allows the borrower to acquire financing without needing to pay off the first mortgage entirely upfront, as the payments made to the new lender indirectly serve to cover the original loan as well. Thus, the key element of a wraparound loan is its ability to layer new financing on top of an existing loan while keeping the existing mortgage intact. This method can create a more flexible financing solution for both the borrower and the lender, enabling transactions to proceed without the complexities of dissolving the first mortgage.

The other options don’t accurately represent the core concept of a wraparound loan. For instance, a wraparound loan does not eliminate the need for a second mortgage, nor does it require the full repayment of the first mortgage, and while borrowers may receive cash through this method, immediate cash isn't the defining feature. The primary characteristic remains the secondary positioning of the new mortgage relative to the