What is a unique feature of a wraparound loan?

A wraparound loan is a type of financing arrangement that uniquely allows a borrower to obtain a new loan that "wraps around" an existing loan. In this type of transaction, the new lender provides financing to the borrower while the existing loan remains in place. The borrower makes payments on the wraparound loan, which are then used by the lender to cover the payments on the original loan.

This arrangement allows the borrower to secure additional funds without needing to first pay off the existing mortgage. It can be particularly advantageous for borrowers looking to access capital while potentially avoiding the costs and complexities associated with refinancing the original loan.

The other options are not accurate descriptions of a wraparound loan's functionality. For example, it does not replace the existing loan entirely, nor does it finance multiple properties under one agreement like a package mortgage might. Additionally, while it might offer competitive interest rates, the defining characteristic of a wraparound loan is not inherently tied to lower interest rates compared to traditional loans. The focus on the new financing structure and relationship to the existing mortgage is what distinguishes a wraparound loan.