What type of mortgage requires the borrower to make payments on both existing and new loans?

A wraparound mortgage is a type of financing in which the new loan wraps around the existing mortgage. The borrower makes payments not only on the new loan but also continues to cover the payments on the existing loan. This arrangement allows the borrower to secure additional funds without paying off the original loan immediately. It can be particularly useful in situations where the existing mortgage has a lower interest rate than what is currently available, enabling the borrower to potentially keep the original financing terms intact while still accessing additional capital.

In the context of the choices, a conventional mortgage typically does not involve wrapping around an existing loan; it is a standard loan used to purchase property. A second mortgage involves borrowing against the equity in the property but does not necessitate payments on both the new and existing loans in the way a wraparound mortgage does. An adjustable-rate mortgage simply indicates a loan with interest rates that fluctuate over time, which does not entail any specific requirement regarding payments on existing loans.