Definition: A buydown uses an upfront payment to reduce a borrower's mortgage interest cost or required payment, either permanently or for an initial period.
Example
A seller funds a temporary payment subsidy for the first two years of a buyer's mortgage.
Keep the distinction clear
A temporary payment buydown does not necessarily change the note rate and ends on schedule. Discount points can instead obtain a lower rate for the loan term. Identify which structure the question describes.
Related terms
Discount Points · Interest · Mortgage
Keep studying
Loan Estimate, Closing Disclosure, and Loan Approval: Different Steps
References: CFPB: temporary buydown financing · CFPB: discount points and lender credits
Pronunciation (US): BY-down (capitals show stress)
Pronunciation reference: Merriam-Webster
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