What defines a wrap-around mortgage?

A wrap-around mortgage is specifically characterized by its function as a secondary mortgage that includes an existing loan. It allows the borrower to take out a new mortgage that "wraps around" the existing loan, enabling them to maintain the original mortgage while accessing additional financing. In this arrangement, the borrower makes payments on the new loan, which then covers the payments on the existing loan.

This type of mortgage can be beneficial in situations where a buyer wants to acquire real estate without refinancing the original mortgage. It enables the seller to retain their existing financing while also receiving the benefits of a new loan, often at a different interest rate or more suitable terms for the buyer.

The other options do not accurately capture the essence of what a wrap-around mortgage entails. A wrap-around mortgage is not related to new construction, does not inherently imply exceeding the property value, and does not concern adjusting interest rates on a monthly basis. These elements are distinct and do not reflect the unique nature of a wrap-around mortgage.