Buydown

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