Definition
A financing technique where the seller, builder, or buyer pays an upfront fee to temporarily reduce the mortgage interest rate during the first few years of the loan. A 2-1 buydown, for example, lowers the rate by 2% in year one and 1% in year two before reverting to the full rate. This makes initial payments more affordable and is common in new construction where builders use buydowns as a sales incentive.
Related Mortgage Terms
- Closing Costs
Fees and expenses paid at the finalization of a real estate transaction, typical...
- Discount Points
Prepaid interest paid at closing to lower the mortgage interest rate. One point ...
- Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount charge...
- Amortization
The process of paying off a mortgage through regular monthly payments of princip...
- Annual Percentage Rate (APR)
The total annual cost of a mortgage expressed as a percentage, including the int...
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