Quick Answer
Owner financing is the broad category of seller-financed transactions. A wraparound mortgage is one specific type of owner financing where the seller has an existing mortgage that remains in place. Not all owner-financed transactions involve an underlying mortgage.
Owner Financing vs. Wrap: The Key Distinction
Owner financing is the broader category: any transaction where the seller provides financing to the buyer instead of or in addition to conventional mortgage financing. A wraparound mortgage is a specific owner-financing structure where the seller finances the buyer purchase AND the seller existing mortgage remains in place.
If the seller owns the property free and clear (no existing mortgage), a seller-financed transaction is owner financing but not a wraparound mortgage, because there is no underlying debt to wrap around.
Example: Free-and-Clear Seller
Seller owns a property worth $300,000 with no mortgage. Seller agrees to finance $270,000 for the buyer at 5%. Buyer pays the seller directly. This is owner financing. There is no wrap because there is no underlying debt.
Example: Seller With Existing Mortgage
Seller owns a property worth $300,000 with an existing $150,000 mortgage. Seller agrees to finance $270,000 for the buyer. The seller existing loan stays in place. This is both owner financing and a wraparound mortgage.
Why Terminology Matters
Calling every seller-financed transaction a wrap is inaccurate and can lead to misunderstandings about what is actually happening with the underlying debt. When legal and title professionals hear wrap, they need to know whether the seller has an existing mortgage that affects lien priority, servicing, and risk.
For more on owner financing structures, see What Is Owner Financing? and How Owner Financing Works. For more on wraps, see What Is a Wraparound Mortgage?