Definition
A buydown is a way to lower your mortgage's interest rate. You pay an upfront fee at closing, which reduces your rate and saves you money over the life of the loan.
Understanding Mortgage Buydowns
A buydown typically appears when negotiating a mortgage. It's a way to lower your interest rate for a period by paying more upfront. In simple terms, you pay money now to save later. Example: If you pay $3,000 for a buydown, your interest rate might drop from 4% to 3% for the first year. This could mean lower monthly payments initially. It's not a permanent interest rate reduction. A buydown doesn’t eliminate your responsibility to make regular payments. It's a temporary arrangement to ease into your mortgage, not a long-term solution.
