Wrap-Around Mortgage Calculator
A wrap-around mortgage is a form of seller financing where the seller creates a junior promissory note with the buyer that wraps around and incorporates the existing underlying mortgage balance.
Enter Parameters
Adjust inputs to calculate real-time estimates
Showing an initial illustrative scenario using standard parameters. Adjust the input fields on the left and click Calculate now to evaluate your specific numbers.
Calculation Summary
Seller receives $1,283.10/month net cash flow spread, achieving an effective yield of 13.39% on equity.
Net monthly cash flow to seller
$1,283.10
Buyer wrap monthly payment
$2,311.36
Senior mortgage payment
$1,028.26
Annual cash flow spread
$15,397.15
A wraparound mortgage is a form of creative seller financing where the seller creates a new junior mortgage that wraps around an existing low-rate senior mortgage. The buyer pays the seller, and the seller continues servicing the underlying loan.
Visual Analytics & Breakdown
Financial Distribution Diagram
Interactive circular proportion of financial allocation
What this wrap-around mortgage calculator is showing you
A wrap-around mortgage is a form of seller financing where the seller creates a junior promissory note with the buyer that wraps around and incorporates the existing underlying mortgage balance. Purpose-built for practical decision-making, the Wrap-Around Mortgage Calculator provides quantitative clarity on this financial problem by transforming raw input assumptions into structured, actionable projections. Calculations reflect Australian Taxation Office (ATO) Stage 3 personal tax brackets, the 2.0% Medicare Levy, and statutory Superannuation Guarantee rates.
Calculations are performed using the mathematical model Monthly Spread = Buyer Wrap Payment - Seller Underlying Payment. Seller Yield on Equity = (Annual Net Cash Spread / Seller Net Equity in Deal) * 100.. In this computation, Agreed property sale price ($) establishes the baseline scale, while parameters such as Buyer cash down payment ($) determine the progression over time. Adjusting these values allows you to observe how incremental changes directly influence your final outcome.
Mathematical Model
Monthly Spread = Buyer Wrap Payment - Seller Underlying Payment. Seller Yield on Equity = (Annual Net Cash Spread / Seller Net Equity in Deal) * 100.
Inputs that matter most
Understanding how each variable impacts the final calculation
Agreed property sale price ($)
Total purchase price negotiated with the buyer.
Buyer cash down payment ($)
Upfront cash paid by buyer directly to seller.
Wrap mortgage interest rate to buyer (%)
Higher interest rate charged to buyer on the new wrap note.
Wrap mortgage term (years)
Amortization schedule for the buyer wrap note.
Existing underlying mortgage balance ($)
Current balance on seller existing low-rate mortgage.
Existing underlying interest rate (%)
Existing contract interest rate on underlying loan.
Remaining underlying term (years)
Years left on seller existing mortgage.
How to interpret your results
Examine the monthly payment breakdown between principal and interest. In early years, interest constitutes the majority of your installment, while principal equity builds progressively over the amortization schedule.
Compare 15-year and 30-year terms to evaluate the trade-off between monthly cash flow affordability and cumulative lifetime interest savings. Confirm that total housing costs remain within conservative debt-to-income benchmarks (typically under 28% of gross monthly income).
- âś“ Verify the Annual Percentage Rate (APR) rather than the nominal interest rate alone, as APR accounts for upfront lender points and origination fees.
- âś“ Test scenarios with additional principal payments to evaluate how accelerated amortization shortens your loan payoff timeline.
- ✓ Budget for auxiliary homeownership expenses—such as property taxes, homeowners insurance, and maintenance—which are separate from principal and interest.
Worked Example Scenario
The snapshot below illustrates a representative calculation using the standard initial parameters:
Net monthly cash flow to seller
$1,283.10
Buyer wrap monthly payment
$2,311.36
Senior mortgage payment
$1,028.26
Annual cash flow spread
$15,397.15
A wraparound mortgage is a form of creative seller financing where the seller creates a new junior mortgage that wraps around an existing low-rate senior mortgage. The buyer pays the seller, and the seller continues servicing the underlying loan.
Wrap-Around Mortgage Calculator Assumptions & Planning Boundaries
This calculator executes deterministic mathematical models based on Monthly Spread = Buyer Wrap Payment - Seller Underlying Payment. Seller Yield on Equity = (Annual Net Cash Spread / Seller Net Equity in Deal) * 100.. It assumes that entered parameters—such as Agreed property sale price ($) and associated rates—remain constant throughout the evaluated period without unmodeled mid-cycle adjustments.
In real-world financial environments, factors including macroeconomic interest rate shifts, localized tax regulations, loan origination fees, closing costs, and inflation variability may cause actual outcomes to differ from theoretical calculations. These figures should be utilized as an analytical planning baseline rather than a legally binding quotation.
Key Factors to Review:
- • Fixed interest rate assumption: Calculations assume the mortgage interest rate remains level over the full term without resets.
- • Escrow exclusions: Standard models exclude property taxes, homeowner insurance, HOA dues, and private mortgage insurance (PMI) unless specified.
- • Prepayment dynamics: Projections assume standard scheduled amortization without factoring in unplanned early principal paydowns.
Frequently Asked Questions
How does a wrap-around mortgage generate profit for the seller? â–Ľ
The seller collects interest at a higher rate (e.g. 8.0%) on the entire financed balance ($315,000), while only paying a lower rate (e.g. 3.75%) on their underlying debt ($200,000). The spread between both payments creates high-yielding passive monthly cash flow.
What is the primary risk of a wrap-around mortgage? â–Ľ
The primary risk is the original mortgage due-on-sale clause, which allows the lender to call the loan fully due if ownership changes. Furthermore, the seller remains legally responsible for the underlying mortgage if the buyer defaults.