What is Buydown?
A buydown is a mortgage financing technique where you pay upfront points to reduce your interest rate, lowering monthly payments over the loan term or for a set period.
A buydown is when a borrower or seller pays money upfront to lower the interest rate on a mortgage. There are two main types: permanent buydowns, which lower the rate for the entire loan term, and temporary buydowns, which reduce the rate for the first few years. Borrowers might use a buydown to qualify for a larger loan or to reduce payments early on. Watch for the break-even point, the time it takes for monthly savings to exceed the upfront cost. Also, consider how long you plan to stay in the home. Buydowns can be funded by the buyer, seller, or builder, and may affect the loan's annual percentage rate.
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