An umbrella mortgage is also known as wraparound. The umbrella mortgage is a unique agreement where one agreement covers one or numerous prevailing loans against security granted against the same asset. In this case, the lender pays different credit amounts to the borrower depending on each realty security, but the mortgagor will be making only one payment to the mortgagee. Although an umbrella mortgage covers a number of securities, but is still considered one mortgage against which one repayment is made by the borrower.
An umbrella mortgage is an ideal instance of an individual wants to arrange for a loan against a property or protected by a mortgage and the equity or the investment in the real estate property is not sufficient for the lender to grant the loan. Thus, if the borrower owns more than one real estate property, he or she is able to borrow against each of them, but in normal situations, he or she would be required to sign separate mortgage agreements for money secured against each of these properties. However, in the case of an umbrella mortgage, although the debtor will offer a number of securities (realty) to obtain the credit, he or she will sign only one mortgage agreement that will cover all the properties given in security for the loan.
However, the umbrella mortgage requires listing a separate deed for each property that has been secured against the loan. The umbrella mortgage contract may add a clause that would permit the debtor to sell one or more property or portions of the asset secured against the loan in any contingency. Including such a clause in the mortgage agreement will insist on a lesser principal amount and may also require a potential fine, provided that it is executed.