In a wraparound mortgage, which of the following is true?

In a wraparound mortgage arrangement, the seller retains the original mortgage while simultaneously creating a new mortgage that encompasses the existing loan. This structure allows the buyer to make payments to the seller, who then continues to make payments on the original mortgage. The wraparound mortgage is advantageous in situations where the original mortgage has a lower interest rate than current market rates, making it beneficial for the buyer to take advantage of that lower rate while the seller retains their existing loan.

This approach enables the seller to potentially profit from the difference between the interest rate of the wraparound mortgage and the original loan, while the buyer benefits from having access to financing without needing to assume the original loan directly. Therefore, the statement about the seller keeping the existing loan accurately describes an integral feature of a wraparound mortgage.

The other options do not reflect the operational mechanics of a wraparound mortgage. For instance, the buyer does not exclusively pay the original lender; instead, they make payments to the seller, who is responsible for making payments on the original loan. Additionally, the wraparound mortgage does not involve a third party assuming the mortgage directly, nor does it necessitate that the buyer refinance the existing loan. Hence, the correct answer focuses accurately on the seller's relationship with the existing