wraparound mortgage
Wraparound Mortgage is when a seller keeps their old mortgage running and lets the buyer pay them directly, wrapping a new loan around the existing one.
In plain English
There is a particular sound a generator makes when the light goes and someone next door calmly connects an extension wire to your own supply because their own is faulty, and everybody agrees on a small arrangement so both sides still get power. Nobody involved NEPA or the estate management. It stayed between the two houses.
A wraparound mortgage works a bit like that extension wire. Say a man in Enugu is still paying off a mortgage of ₦18,000,000 on his house through a commercial bank. He wants to sell the house for ₦25,000,000, but the buyer cannot get a fresh mortgage approved fast enough, or the bank's rate is too painful right now. So the seller says, do not worry, pay me directly every month, and I will keep paying my own bank from what you give me.
The buyer now has one loan, the seller's wraparound loan, but underneath it, the seller's original mortgage is still alive and being fed by those same payments. The seller becomes something like a landlord of debt, sitting between the buyer and the bank, usually charging a slightly higher rate to make a bit of profit on the arrangement.
In the United Kingdom this kind of private seller financing is rare because mortgage lenders there often have a clause that says the loan must be paid off in full if the property is sold, which makes wrapping nearly impossible without the bank's blessing. It shows up more in places with looser lending rules or during periods when banks have gone cold on approving new mortgages.
The risk sits mostly with the buyer. If the seller stops forwarding payments to their own bank, the original mortgage can go into default and the bank can foreclose, even though the buyer has been paying faithfully every month. It only works when there is real trust, or a proper lawyer holding everyone's feet to the fire.
A house is worth ₦25,000,000. The seller still owes ₦18,000,000 on their original mortgage. The buyer pays the seller ₦25,000,000 through a new wraparound loan at a slightly higher rate. The seller uses part of that money to keep paying the ₦18,000,000 original loan and keeps the difference as their own margin.
Questions people ask
Is a wraparound mortgage legal in Nigeria?
There is no law against private arrangements like this between a buyer and seller, but it works best when a solicitor draws up the agreement properly and both the buyer and seller's bank are aware, so nobody gets a shock later.
What happens if the seller stops paying their original mortgage?
The bank can still foreclose on the house because the original mortgage is in the seller's name, even if the buyer has been paying every month without missing, which is why this arrangement needs real trust or legal protection.
Why would anyone choose this instead of a normal mortgage?
It usually happens when the buyer cannot immediately qualify for a fresh mortgage, or when bank rates are too high, so the seller offers a workaround that lets the sale happen sooner rather than waiting for perfect conditions.
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