Buy-Up

AAA

DEFINITION of 'Buy-Up'

Points paid by a lender to a borrower or mortgage broker for a loan with an above-market interest rate. When the points are paid to the borrower, it is known as a rebate, and must be used to defray loan settlement costs. When the points are paid to the mortgage, it is known as yield spread premium, and is part of the broker's compensation.

A buy-up is also known as "negative points".

INVESTOPEDIA EXPLAINS 'Buy-Up'

Receiving a rebate in exchange for a higher interest rate can be economically advantageous to a borrower - if the borrower expects to hold the mortgage for a short period of time. The reduction in out-of-pocket loan settlement costs can offset the increased interest that will be paid out over a short-time horizon. A thorough analysis should be made in any mortgage scenario involving buy-ups and buy-downs, or positive and negative points.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  3. Points

    1. A 1% change in the face value of a bond or a debenture. 2. ...
  4. Yield Spread

    The difference between yields on differing debt instruments, ...
  5. Yield Spread Premium

    A form of compensation that a mortgage broker, acting as the ...
  6. Negative Points

    A cash rebate paid by lenders to a mortgage broker or the borrower ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Credit & Loans

    Mortgage Points: What's The Point?

    Learn how to pay less for your home in the long run, or save in the short run.
  3. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  4. Options & Futures

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  5. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Home & Auto

    Where are home values falling the fastest in the US, and why?

    Learn about the metropolitan areas in the United States experiencing the largest drops in median single family homes values in 2014 and the reasons behind it.
  7. FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
    Credit & Loans

    Before You Choose An FHA Mortgage: 7 Key Points

    FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
  8. Home & Auto

    How did the ABX index behave during the 2008 subprime mortgage crisis?

    Read about the disastrous performance of the various ABX indexes in the subprime mortgage crisis of 2008 during the middle of the Great Recession.
  9. FHA loans are often a good alternative for those who have trouble obtaining a conventional mortgage, although you do have to pay an insurance premium.
    Home & Auto

    Mortgage For A Manufactured Home? Try The FHA

    FHA loans are often a good alternative for those who have trouble obtaining a conventional mortgage, although you do have to pay an insurance premium.
  10. Mutual Funds & ETFs

    How do traders use the ABX index?

    Learn about some of the ways traders, banks and even hedge funds have traditionally used the ABX indices to make bets on mortgage-backed securities.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center