What type of mortgage allows a borrower to obtain a new loan without paying off the existing loan?

A wraparound mortgage is a type of financing that enables a borrower to secure a new loan that "wraps around" an existing mortgage. This means the borrower does not need to pay off their current loan, but rather the new lender extends a second loan that includes the remaining balance of the initial mortgage and adds the new funds needed by the borrower.

In this arrangement, the borrower makes payments to the new lender, who in turn makes payments on the original loan. This can be beneficial for borrowers who want to avoid the costs and complications associated with paying off their existing mortgage, such as early payoff penalties or closing costs. The wraparound loan may have more favorable terms or a potentially lower interest rate compared to the original mortgage, making it an attractive option in certain situations.

This structure can be particularly useful in real estate transactions where the borrower wants to sell their home but retain the existing mortgage terms, or in situations where traditional refinancing isn't possible.