First deal done and it was a wrap, 6.75 over a 3.375, full numbers

659 a month on a house she no longer owns is more than she'd clear renting it after a manager and a vacancy. Does the 391 escrow come out of your 1,764 or is that on top?

84 months is the number I'd stare at. If rates in 2032 are 8 and the house appraises flat, what's your exit? Refi at whatever it is, sell, or ask her for an extension you can't force her to give?

The servicer is the part I care about. What does it cost you monthly, and who chose them, you or her?

Also, if the servicer misapplies a payment and the underlying loan goes 30 days late, whose credit takes it? Hers, since it's still her loan? That seems like a thing she should have wanted in writing more than you did.

How did the conversation even start? I can't picture asking a seller to leave her mortgage in place. Did her agent bring it or did you?

Spread math doesn't work the same down where I look. Underlying balances are 60 to 90k, so 3 points of spread on 110k is a couple hundred a month and the seller decides it isn't worth the paperwork. The structure needs a real balance under it to be interesting.

Insurance is where I'd have gotten stuck too. Did you write a builder's risk or just a landlord policy? And did the underlying lender's mortgagee clause have to stay exactly as it was worded, or could your carrier list them as additional?

Two words in here are still tripping me up. Due-on-sale clause, does that mean her bank is allowed to demand the whole 228k back because she sold? And what's a payoff statement, is that different from a monthly statement?

@juniper yes, most mortgages say the lender can call the balance due if the property transfers. Whether they do is a different question and nobody can promise you either way. A payoff statement is the lender's own written figure for what it takes to close the loan out on a given date, including anything deferred that a monthly statement might not show.

My question for @pike is the 40,000. If the underlying lender did accelerate a year in, where does your down payment sit? Do you have a cure right in the note?

Curious about the other direction. Did she screen you? Credit pull, reserves, proof of funds, anything? She's carrying default risk on a 272k note and I'd want to know what she looked at.

Ran it out. Her spread on 659 a month against zero remaining basis in the property is a yield most people won't get from a bond ladder, and she has recourse to a house she knows. What I can't get comfortable with is that her whole position rests on you sending money and her lender staying quiet, and she controls neither.

The failure I watched on a wrap a friend held wasn't default. The underlying loan's escrow shortage bumped the required payment 140 a month after a reassessment, and her wrap payment was fixed. Her spread shrank every year while the note stayed flat. @pike, does your note pass escrow changes through to you or does she eat them?

Would straight seller financing with no underlying loan have gotten you the same house at a worse price? Feels like you paid a premium on price for a payment she could only offer because her cheap loan stayed in place.

Did a wrap on a fourplex two years ago as the buyer. The thing that hit us was the tax bill after sale. County reset the assessed value to the new sale price, escrow went up almost 300, and the seller's underlying payment went with it. We hadn't put a word in the note about who absorbs that. Ended up splitting it, which was generous of her and lucky for me.

Worth saying for anyone copying this: recording practice and transfer tax on the deed differ state to state, and about a dozen states don't publish sale prices at all. That last part is sometimes why nobody's underlying lender ever notices anything, which is not the same as the clause not existing.

The 84 months is the whole deal to me. Everything else you described is manageable, and that one date isn't, because it depends on a market and a lender you can't see yet.

@pike if you were doing it again, what's the order? I want to know what you'd verify before any money goes hard, because @compass just posted about losing earnest money on exactly the balance question you solved with the written payoff.

The refinance question at month 84 is the one I'd want answered now rather than then. Your payment history on a privately serviced wrap note may or may not be treated as mortgage history depending on the lender and how the servicer reports, and I've seen it go both ways. Get a lender to tell you in writing what documentation they'd accept from your servicer, and get it early enough that you can change servicers if the answer is bad.