A wrap around encumbrance may be either a wrap around mortgage, an all-inclusive deed of trust, or a wrap around land sale contract. A wrap around encumbrance does not disturb an existing encumbrance. It simply wraps around (includes) the first mortgage, and is inferior in priority in the event of foreclosure.

In a wrap around encumbrance the buyer should have protection to ensure that the seller continues to make payment on all prior mortgages. This can be accomplished through a contract collection escrow, whereby the buyer pays the monthly payment into the contract collection account, and then escrow makes the payments on prior mortgages and property taxes and the balance is sent to the seller.