Is a wrap the same thing as subject-to? Two videos said opposite things

Question

One video said a wrap and subject-to are basically the same deal with different paperwork, and another said they're completely different and the difference is whether a new note gets created. I get that in both cases the seller's old mortgage stays where it is. Where I lose the thread is the money. In subject-to it sounded like the buyer just takes over the existing payment. In a wrap there's a second, bigger loan on top? So the buyer pays more than the old payment and the seller keeps the extra? If that's it I think I follow, but then what's the seller's old loan doing in the wrap version if the buyer's payment doesn't go to it directly.

tashaford30 · Answer

The second video is closer. In subject-to there's no new note, the buyer takes title and starts covering the existing payment. In a wrap the seller writes a brand new note to the buyer, larger balance, higher rate, and that note wraps around the old one. Old loan stays in the seller's name, seller keeps paying it out of what the buyer sends. The seller's profit is the gap.

priya_n21 · Answer

Small numbers version, because that's how it finally landed for me. Seller owes 200k at 4 percent. Sells at 250k, buyer puts 20k down, seller carries a 230k note at 7. Buyer's payment goes to the seller. Seller keeps paying the 4 percent loan on the 200k and keeps whatever's left. That leftover is the whole point of doing it.

omar_haddad · Answer

Both structures leave the old loan sitting there, which is why the due-on-sale clause comes up in either one. That part isn't a difference.

Is a wrap the same thing as subject-to? Two videos said opposite things

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