NMLS Uniform State Test (UST) Mortgage Practice Exam 2026 - Free Mortgage Practice Questions and Study Guide

A wraparound mortgage is a type of financing that allows a borrower to combine a new mortgage with an existing mortgage while the original mortgage remains in place. This structure enables the borrower to obtain additional financing without needing to pay off the existing loan. The new lender essentially "wraps" their mortgage around the existing one, making the existing mortgage payments and a portion of the new mortgage payment to the new lender.

This type of mortgage can be beneficial in certain scenarios, such as when the existing mortgage has a lower interest rate than current market rates. It allows the borrower to leverage their existing mortgage while accessing additional funds, creating a single comprehensive loan structure that often simplifies the payment process for the borrower. This arrangement serves as a useful tool in real estate transactions, particularly in scenarios like the sale of property where the buyer may wish to take over the seller's existing financing.

The other choices are unrelated to the concept of a wraparound mortgage. For example, being an interest-only loan pertains to a specific payment structure and not the combination of mortgages, while refinancing without closing costs would relate to specific loan terms rather than the nature of the mortgages involved. A fixed-rate mortgage refers to the interest rate structure rather than the integration of multiple loans into a single arrangement.