How the wraparound analysis works
A wraparound mortgage keeps the seller's existing loan in place while the buyer signs a new, larger note that "wraps" it. The buyer pays the seller on the wrap note; the seller keeps paying the underlying lender. Two numbers drive the deal: the monthly spread (wrap payment received minus underlying payment owed) and the equity spread (wrap balance minus underlying balance, which the seller collects at the balloon).
Why wrap yields are so high
The seller earns the wrap rate on the entire wrap balance while paying the underlying rate on money that is mostly the original lender's. If $250,000 of a $325,000 wrap note is really the bank's 4% loan, the seller is earning a 7.5% coupon on capital they didn't provide. That's why this calculator computes the IRR on the seller's net position — equity financed at close as the outflow, monthly spread as inflows, and net balloon proceeds at exit — rather than just quoting the note rate. Yields of 15–30%+ on seller equity are common in well-structured wraps.
Timeline risks the tool flags
The most dangerous wrap structure is an underlying balloon that comes due before the wrap balloon — the seller owes a lump sum while the buyer keeps making small monthly payments. The calculator flags this in red with the date and amount. It also detects the "full-payment date" when the underlying loan pays off naturally and the entire wrap payment becomes seller cash flow, and it computes the net payoff at the wrap balloon (wrap balloon received minus underlying balance owed).
New to wraps? Read What Is a Wraparound Mortgage? For simpler owner-financed deals without an underlying loan, use the seller financing calculator.