It is common for homeowners to hold a second, maybe even a third mortgage on a home. The multiple liens on the property can create confusion to potential buyers or in the event foreclosure proceedings are started by one or more lender. An all inclusive trust deed is one mortgage note that holds two or more loan balances on it.
An all inclusive trust deed holds the first mortgage, the second mortgage and perhaps a third mortgage position in one loan note. It simplifies how a borrower pays his mortgage bills. One bill is paid to the lender who distributes payments to each mortgage position. The all inclusive trust deed uses a title company that gets a fee for sending payments to all parties beyond the primary position.
An all inclusive trust deed is also called a wrap-around mortgage in some situations and is an alternative financing option. A seller may opt to hold his existing loan while the buyer takes on a smaller loan to cover the difference in the purchase cost. The buyer assumes the existing note and wraps the new mortgage around it but the seller is responsible for payments on the first and second mortgage.
The all inclusive deed is convenient for the borrower who wants to remit one payment. It also provides convenience to lenders who wish to track any risk of missed payments and potential foreclosure by one of the other note holders. For wraps where the seller maintains his initial loan, the buyer doesn't need to qualify for a larger loan amount. He is relying on the existing credit and loan terms of the seller and his own for a smaller value. A buyer may also lock in a more favorable rate on an existing mortgage note that isn't available in the current market.
While there are advantages to an all inclusive deed, there are also risks to all parties. The buyer must rely on the title company or seller holding the initial loan to make all payments. There is also the risk to the seller that the buyer is not able to maintain the payments of both loans.