A
An allinclusive trust deed or mortgage is also sometimes referred to as a
wraparound or overriding trust deed or mortgage. This is a trust deed or
mortgage that is subordinate to, yet includes all the encumbrances to which it is
subordinated. But sometimes in connection with refinancing. It is easier to
illustrate than to explain.
A few years ago, I knew an six months’ unearned the unpaid balance of the first
owner who wanted to sell a interest, or another $900. mortgage, and that the seller
property on which he was
would still be responsible for
paying off a twentyfive year A second possibility is that making payments on that
loan. The unpaid balance the buyer might assume the underlying obligation as it
was $30,000. He was paying $30,000 existing loan and stood. So the seller was in the
6% interest. He found a have the seller carry back a comfortable position of receiving
wouldbe buyer, and the two purchase money second interest at an annual rate of
of them agreed on a price of trust deed or mortgage for $4,250 (8 ½ percent of
$60,000, with the buyer to the remaining $20,000 of $50,000) while paying out
put up $10,000 in cash, the sales price. The interest interest at an annual rate of
leaving $50,000 to be rate could be whatever the $1,800 (six percent of
financed somehow. buyer and seller agreed on $30,000), thereby netting
up to the maximum legal $2,450, or 12.25 percent on
One possibility was for the rate, which in their state the $20,000 difference between
buyer to try to refinance the was 10 percent at the time. the two notes. This is 2.25
$30,000 first mortgage with a
percentage points higher than
new, larger loan. However, A third possibility (and the could legally have been
the money market was tight one they finally decided on) charged if he had carried back
at the time. Any new loan he was to use an allinclusive a $20,000 purchasemoney
might get probably would not deed of trust. The buyer second. The arrangement put
be for more than $42,000 gave the seller a promissory an extra $450 per year into
and would cost him 10 note in the amount of his pocket.
percent interest plus at least $50,000 with interest at 8 ½ two points. In addition, there percent. The note contained would be a prepayment fee a clause to the effect that on the existing loan equal to it’s face amount included
42
AllInclusive Trust
Deed or Mortgage