With this type of loan, the new, second lender continues to service the first debt, and the borrower makes payment to the new lender for an amount of the first and second loans. What is this type of loan?

A wraparound loan is a type of financing that involves a new lender who takes over the responsibility of servicing an existing debt while also providing additional loan funds to the borrower. In this scenario, the new lender essentially “wraps around” the first mortgage, meaning the borrower makes a single payment that covers both the existing loan from the first lender and the new loan from the wraparound lender. This can be beneficial for borrowers seeking additional funds without having to refinance the first loan directly.

This structure allows for flexibility in financing, as it may enable the borrower to access needed capital while possibly retaining more favorable terms from the existing mortgage. The wraparound lender usually pays the first lender directly, and the borrower benefits from consolidating their payments, simplifying the loan process.

In contrast, leasehold loans are typically associated with properties leased from a landowner and may not involve the complexities of an existing debt. Tax-exempt loans relate to financing that benefits from certain tax advantages, often for public or nonprofit entities, whereas construction loans are short-term loans specifically intended to cover the costs of building a structure, not servicing existing debt. Wraparound loans uniquely blend existing and new debt into a single payment structure, illustrating their particular utility in asset management.