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.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Mortgage

    A debt ...
  2. Mortgagor

    An individual or ...
  3. Mortgagee

    An entity that ...
  4. Real Estate

    Land plus ...
  5. Origination

    The process of ...
  6. Initial Rate Period

    The period of an ...
  7. 3-2-1 Buydown

    A type of ...
  8. 2-1 Buydown

    A type of ...
  9. Delinquent

    The failure to ...
  10. Interest Rate Ceiling

    The maximum ...

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. Find The Best Mortgage Rates

    Search and compare the best fixed and adjustable mortgage rates in your area with Bankrate.com.
  4. Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  5. 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.
  6. Profit From Mortgage Debt With MBS

    Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing.
  7. How Lender Overlays Prevent Mortgages

    Loan applications are increasingly being rejected because of lender overlays.
  8. Protect Your Personal Assets

    A family limited partnership (FLP) can go a long way toward securing your family's property.
  9. What You Should Know About Home Appraisals

    Home appraisals are an unbiased way to determine a home's value. Here is what you need to know about obtaining one.
  10. A Tax Primer For Homeowners

    Go beyond interest and find out how mortgage points affect your taxable income.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center