What is a buy down?

A buy down is a mortgage plan that involves the buyer paying lower interest rates for the first few years of the mortgage or the entire mortgage period as the case may be. A buy down is also known as “paying points”.

When a buyer desires to pay less on monthly interest rates over a mortgage loan, using the buy down technique is one of the mortgage financing methods to achieve that. With a buy down, usually initiated by paying a percentage sum of the loan at the beginning of the mortgage, the interest rates for the mortgage period can be reduced for the first few years based on the agreement

Buy down options are often used by property sellers to attract buyers to their estate. This means that the seller may offer to pay for the buy down on behalf of the buyer. However, the price of the property is often increased to cover for the cost of paying for the buy down.

Buy down is especially useful to a buyer that wants to stay in the home for a long term and have a higher monthly savings.

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