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".

BREAKING DOWN '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. Negative Points

    A cash rebate paid by lenders to a mortgage broker or the borrower ...
  2. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  3. Interest Cost

    The cumulative sum of the amount of interest paid on a loan by ...
  4. Closing Points

    Points that are paid at the time of closing of a mortgage transaction. ...
  5. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  6. Yield Spread Premium

    A form of compensation that a mortgage broker, acting as the ...
Related Articles
  1. Investing

    Financing Basics For First-time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  2. Personal Finance

    How Do Mortgage Lenders Get Paid and Make Money?

    When homebuyers educate themselves on how mortgage lenders get paid and make money, they are more likely to save thousands of dollars on their mortgages.
  3. Personal Finance

    Advantages And Disadvantages of Using a Mortgage Broker

    Mortgage brokers may be able to find you the loan of your dreams, but you should consider the potential downsides before hiring one.
  4. Investing

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
  5. Personal Finance

    Finding the Best Mortgage Rates in 2017

    As home-buying technology has progressed, the process of finding the best mortgages rates can all be done online. Here's how:
  6. Personal Finance

    How to Find the Best Refinance Companies

    From traditional lenders to online loans, here's everything you need to know about refinancing your mortgage.
  7. Personal Finance

    Top 6 Mortgage Mistakes

    These common errors could end in foreclosure.
  8. Personal Finance

    Mortgage Company

    A company engaged in the business of originating and/or funding mortgages for residential or commercial property.
  9. Personal Finance

    5 Things You Shouldn't Tell Your Mortgage Broker

    Applying for a mortgage can be a strenuous process. Here are five things to avoid doing when meeting with your mortgage broker.
  10. Personal Finance

    5 Secrets You Didn't Know About Mortgages

    Being savvy about the ins and outs of mortgages can mean big savings in the long term.
RELATED FAQS
  1. What’s the Difference Between a Mortgage Lender and a Mortgage Servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  2. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
  3. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  4. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  5. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
Trading Center