- paying additional discount points to a lender in exchange for a reduced rate of interest on a loan. The reduced rate may apply for all or a portion of the loan term.
- home seller arranging a lower interest by making a payment to the lender, thereby buying down the loan for the home purchaser.
cash payment by a mortgage lender allowing the borrower to receive a lower rate of interest on a mortgage loan. For example, a home builder having trouble selling homes may offer a buy down with a local lender which will enable home buyers to qualify for mortgages that they would otherwise not qualify for. The buy down may lower the mortgage rate for the life of the loan, or sometimes just for the first few years of the loan.
the action to pay additional discount points to a lender in exchange for a reduced rate of interest on a loan. The reduced rate may apply for all or a portion of the loan term.
a loan that has been bought down by the seller of the property for the benefit of the buyer.
Example: In order to achieve a sale of a property, Jones arranged for a buy-down loan. If a seller agreed to Jones's price, Jones would buy down the interest rate for the first 3 years by paying the lender 5% of the loan amount at closing.
