Which scenario would most likely require a wraparound mortgage?

A wraparound mortgage is a financial arrangement where a new mortgage is created that encompasses or "wraps around" existing loans. This allows the seller to keep the existing financing in place while providing the buyer with a new agreement that combines the existing loan balance and an additional amount needed for the purchase.

In the scenario where a seller wants to combine two existing loans, a wraparound mortgage would be an appropriate solution. This allows the seller to avoid the traditional process of paying off the original loans before selling the property, making it beneficial for both parties involved. The buyer can take over the existing loans while potentially benefiting from more favorable terms from the seller.

In contrast, the other scenarios do not align with the function of a wraparound mortgage. A buyer purchasing outright typically does not involve financing that would create a wraparound situation. A lender offering a single mortgage to a new buyer simplifies the transaction without the need for structuring around existing loans. Additionally, refinancing for a lower interest rate usually suggests a straightforward loan modification rather than the complexity of a wraparound mortgage arrangement.