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What is a buy-down?

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What is a buy-down?

10 Answers

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A buy-down is where the buyer, seller or lender pays additional discount points in return for a below market interest rate. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.

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A temporary “buy-down” occurs when a lender lowers the interest rate on a mortgage for the first few years of the loan. A permanent “buy-down” buys the rate down for the life of the loan. The cost for these are called “fees” or “points”.

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There are two types of buy-downs, permanent and temporary. Permanent buy-downs are done when you pay up-front discount points to buy the rate down permanently for the term of the loan. For instance, if rates were at 8.125%, you might pay one discount point up-front to buy the rate down for the term of the loan to 8.00%.

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A “buy-down” occurs when a lender lowers the interest rate on a mortgage — for a fee — for the first few years of the loan.

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Where the buyer, seller or lender pays additional discount points in return for a below market interest rate. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.