Buydown

Filed Under »
Dictionary Says

Definition of 'Buydown'

A mortgage-financing technique with which the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage, but possibly its entire life. The builder or seller or the property usually provides payments to the mortgage-lending institution, which, in turn, lowers the buyer's monthly interest rate and therefore monthly payment. The home seller, however, increases the purchase price of the home to compensate for the costs of the buydown agreement.
Investopedia Says

Investopedia explains 'Buydown'

Buydowns are easy to understand if you consider them a mortgage subsidy made to the homebuyer on behalf of the seller. Typically, the seller contributes funds to an escrow account that subsidizes the loan during the first years, resulting in a lower monthly payment for the homebuyer. This lower payment allows the homebuyer to qualify more easily for the mortgage.

Most buydowns last for a period of one to five years, and the mortgage payments increase once the buydown expires.

Articles Of Interest

  1.

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.

  2. Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.

  3. Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.

  4. How To Properly Research For The Best Mortgage Rate

    You’ve probably been told to shop around for the best rate, but what exactly does that entail? Find out how to ensure you're getting the best possible rate on your mortgage.

  5. What Is A Mortgage?

    A mortgage is a loan used to purchase a home, where the property serves as the borrower's collateral.

  6. A Lousy Investment That May Be A Good Source Of Income

    In the past few years reverse mortgages have been heavily marketed as the way to become debt, and worry, free. For some seniors a reverse mortgage makes sense, for other though this dream product ...

  7. How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.

  8. 6 Tips For Selling Your Home Fast

    Find out what you can do to stand out from the competition and make your home an easy sell.

  9. 5 Smart Ways To Use Your Tax Return

    This year, find out how to stretch your tax refund further to strengthen your future.

  10. Common Liabilities That Hurt Your Net Worth

    Every penny that you keep out of the liability side of the net worth equation essentially ends up on the asset side.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center