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Do I lose down payment if wraparound mortgage expired?

My wraparound mortgage expired before I could refinance it. Do I lose my down payment? What are my options?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Your rights with a wraparound mortgage contract depend on if you took ownership of the property and if the wraparound mortgage was recorded with your county recorder office. With a properly structured wraparound mortgage the borrower / buyer receives a grant deed in their name from the property seller that legally documents the borrower's ownership of the property. The wraparound mortgage and property ownership transfer should also be recorded by your county recorder's office. If you legally own the property through a grant deed and the transaction was recorded properly, then you should have certain rights according to federal and state real estate laws that offer you some protection in the event you cannot repay or refinance the wraparound mortgage.  Whether or not you lose your down payment depends on how the wraparound mortgage was structured and the real estate laws in your state.

Real estate laws vary by state so we recommend that you contact your state housing commission or department to understand your rights based on your specific situation. As an example, I have included the contact information for the Texas Real Estate Commission below. Additionally, you should also contact a qualified real estate attorney who can provide additional assistance and legal guidance.

Texas Real Estate Commission web site / Phone Number: (512) 936-3000

Finally, the best way to handle a wraparound mortgage is to refinance and eliminate it with another mortgage. Based on your email, it sounds like you had some challenges refinancing your wraparound mortgage but we also recommend that you contact multiple lenders to understand what is possible for you.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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