Mortgage Glossary
Buydown
Also called: rate buydown, 2 1 buydown, 3 2 1 buydown, temporary buydown
Definition
Paying money upfront to lower the interest rate, either temporarily for the first years of the loan or permanently for the full term.
Why it matters
Seller paid temporary buydowns can lower a buyer's early payments without the seller reducing the sale price.
Related terms
- Discount Points
- An upfront fee paid to permanently lower the interest rate. One point equals 1% of the loan amount.
- Seller Credit
- Money the seller agrees to contribute toward the buyer's closing costs or a rate buydown, limited by loan program rules.
- Interest Rate
- The annual rate charged on the loan balance, used to calculate the interest portion of each payment. It is not the same as APR.
Written by
Manny Oloyede, Mortgage Broker
NMLS #1824463 | Ultimate Mortgage Brokers LLC NMLS #2619461 | Licensed in OH | KY | NC | PA | SC | TN | TX
I have worked in mortgage lending since 2018 out of the Akron / Cuyahoga Falls Branch, helping buyers, homeowners and investors across Northeast Ohio and every state where I am licensed. These guides reflect the questions I answer most often, written the way I would explain them on a call.
General education only, not financial, legal or tax advice, and not a commitment to lend. Guidelines vary by program and change over time. Manny Oloyede, NMLS #1824463. Ultimate Mortgage Brokers LLC, NMLS #2619461. Licensed in OH | KY | NC | PA | SC | TN | TX. Equal Housing Opportunity.
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