Tool 02 Wrap Spread Calculator

The spread is the easy part. The exposure is the part to plan for.

Compare your existing loan with the wrap note you'd give the buyer. See the monthly spread, how your equity changes, and what you'd owe if your lender called the loan.

In a wrap, your existing loan stays in place. The buyer pays you on a new, larger note, and you keep paying your lender. The difference is your spread. Utah's Seller Financing Addendum calls this a “Note and All-Inclusive Deed of Trust” (Seller Financing Addendum § 1).

The due-on-sale clause is the risk that sits under every wrap. If your lender accelerates, the full balance of your loan is due — but your buyer still owes you only monthly payments. The exposure panel shows that gap for any month you pick.

The due-on-sale clause — read this first

Most home loans let the lender demand the full balance if the property is sold or transferred. Federal law lets lenders enforce that clause (12 U.S.C. § 1701j-3(b)(1)). A wrap, a subject-to transfer, and a contract for deed are not on the federal exemption list (§ 1701j-3(d)).

Nobody can promise you the lender won't call the loan. Plan as if it could happen: know the payoff, keep an exit ready (refinance, sale, or reserves), have a third-party servicer pay the underlying loan, and put the risk in writing so both sides signed knowing it.

FHA or VA loan? Don't wrap it. FHA and VA loans are generally assumable: with the servicer's approval, a qualified buyer can take over the loan itself at its current rate. A wrap keeps the seller on the hook and adds due-on-sale risk to a loan that could have been transferred properly. Ask the servicer about a formal assumption first.

With an all-inclusive trust deed, the addendum requires the seller to show within 10 days that the underlying payments are current (Seller Financing Addendum § 4). A third-party servicer that collects from the buyer and pays your lender first keeps that record clean.

Your existing loan

Balance today

Rate

Monthly P&I

Principal and interest only

The wrap note to your buyer

Sale price

Buyer's down payment

Rate

Amortization

Buyer pays you monthly$2,627

Your monthly spread$1,207

Annual spread$14,482

Wrap note amount$405,000

Exposure — if the lender calls the loan

Months after closing: 0

Payoff due on your loan	$280,000
Less the buyer's down payment	−$45,000
Cash you'd need to find	$235,000
Spread collected so far	$0
Buyer still owes you	$405,000
Your equity inside the note	$125,000

The buyer owes you over time, not today. If the lender accelerates, the realistic exits are the buyer refinancing, a sale, or you paying off the loan — plan which one before you sign.

Equity buildup over time
After	Your loan balance	Buyer owes you	Your equity in the note	Spread collected
1 yr	$271,520	$400,684	$129,164	$14,482
3 yr	$253,752	$391,129	$137,376	$43,446
5 yr	$234,849	$380,197	$145,347	$72,409
10 yr	$182,139	$345,469	$163,330	$144,819

This is general information, not legal advice. Confirm with an attorney before you rely on it.

How to lower the exposure

Ask for a larger down payment, so less of your loan is uncovered.
Use a third-party servicer that pays your lender from the buyer's payment.
Set a refinance deadline for the buyer, with a balloon if your exclusion allows it.
Keep reserves, or a line of credit, sized to the shortfall above.
Put the due-on-sale risk in writing, signed by both of you.

Not sure a wrap is the right tool? The which-instrument tool compares it with a plain seller-carry and a contract for deed.