What is a Mortgage Buy Down? part 1

A Mortgage Buydown:

A mortgage buydown is a way for a home buyer to lower their interest rate for a portion of their mortgage in exchange for an upfront fee. The lower interest rate can help reduce monthly payments. Buydowns can be temporary or permanent, and are often paid for by the seller or builder to help close the deal.

Types of Buydowns:

Temporary Buydown:

is a financial arrangement that allows a homebuyer to temporarily lower their interest rate and monthly mortgage payments. The length of the buydown and the size of the reduction depends on the type of mortgage.

Permanent Buydown:

lowers a borrower's interest rate for the entire term of the loan. It's usually done by paying a fee, called discount points, as part of the closing costs. The more points purchased, the lower the interest rate will be, but the initial cost of the loan will also be higher. Lenders may also limit the number of points that can be purchased.

What did you learn? Were you aware of buydowns? Have a question… please reach out to our office.