Definitions for

**"Buy Down"****Related Terms:**Buy-down, Buydown, Temporary buydown, Buydown mortgage, Interest rate buydown plan, Buy-down mortgage, Loan discount, Permanent buydown, Option arm, Fixed-rate mortgage, Lock-in rate, Fixed-rate loan, Payment shock, Fixed rate mortgage, Rate-improvement mortgage, Lock in, Lock-in, Fixed rate loan, Terms, Fixed rate mortgages, Note rate, Growing equity mortgage, Mortgage rate, Special allowance, Closed mortgage, Yield spread premium, Fixed rate loans, Convertible loan, Discount, Step-rate mortgage, Rate lock, Lock, Variable-rate mortgage, Introductory loan, Alternative financing, Renegotiable rate mortgage, Fixed rate, Discount point, Floating rate loan, Two-step mortgage, Lock-in period, Discount mortgage, Discounted rate mortgage, Frm, Blended rate, Redemption penalty, Fixed rates, Payment cap, Interest only mortgages

A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of the loan.

Money advanced by an individual (builder, seller, etc.) to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years. A "2-1" Buy down can be used to qualify a borrower who otherwise may not qualify for a loan by reducing the interest rate on the first two years of payments, thereby making the mortgage more affordable.

Money advanced by a seller, builder, or other party to a buyer in order to reduce the buyer's monthly payments for a home mortgage either for the entire term of the loan or for a designed period at the beginning of the term of the loan.

When the seller, builder or buyer pays an amount upfront to reduce monthly payments for a home mortgage either during the entire term or for an initial period of years.

A method of lowering the interest rates on a mortgage, either temporarily or for the entire term of the loan. Often points are paid up front to make up the difference between the rate actually charged on the mortgage and the rate at which the buyer pays. Practically anyone -- sellers, buyers, home builders, relatives, etc. -- can buy down rates.

a method of lowering the rate and the monthly payment that you will have for the first two years

an alternative financing technique where you make significantly lower payments for the first few years

A method of lowering the buyer's monthly payment for a short period of time. The lender or homebuilder subsidizes the mortgage by lowering the interest rate for the first few years of a loan.

An incentive offered by a developer or seller that allows the buyer to lower the interest rate by putting up a certain amount of money. Cap - The limit on an interest rate for an adjustable mortgage (either on each adjustment or over the life of the mortgage).

an arrangement where a party pays a lender an up-front fee, or premium, to "buy down" the interest rate on a loan for a temporary time period, usually one to three years: usually expressed as two numbers. For example, 2/1 where the two represents a 2% rate buydown the first year and the one represents 1% buy down the second year, the third year the rate would revert to the "straight" note rate. of Page || Bottom of Page Cash-Out Refinance: - a transaction that provides cash proceeds to the borrower in excess of 1% of the mortgage amount or provides cash that is used to pay-off consumer debt.

Where the borrower, seller, or third party pays points (a percentage of the loan amount paid to the lender to increase the net yield and to reduce the interest rate. One point = 1% of the loan amount) to the lender in order to offer an attractive interest rate. Buy downs can be permanent (i.e. fixed for the term of the loan) or temporary (i.e. for one year, two years, etc.) usually used as an aid to help the borrower qualify for a mortgage loan.

The cost of making the effective interest rate lower than the current market rate. This is usually paid by the vendor but may also be paid by the borrower. Example: Say current interest rates are 10% for a one year term and the vendor wants to make his property more attractive by offering financing at 7% on a mortgage of $100,000. for a one year term. The cost to "buy down" the interest would be approximately $2,700.00. This would be paid directly to the lender.

Obtaining a lower interest rate (buying down the rate) by paying additional points to the lender. The lower rate may apply for the full duration of the loan or for just the first few years. A buydown may be used to qualify a borrower who would otherwise not qualify . This is because a buydown results in lower payments which are easier to qualify for. Example : A very popular buydown is the 2-1 buydown. If the interest rate on the note is 9%, the buydown results in the rate being 7% (9%-2%) for the first year, 8% (9%-1%) for the second year, and 9% thereafter.

Borrower's option to pay additional funds in the form of closing costs to reduce the interest rate on the mortgage. Commonly used to lower monthly mortgage payments for the life of the loan, or a predetermined period of time.

A cash payment made by any party to reduce a borrower's monthly loan payment.

A sum of money paid to a lender at closing to reduce the borrower's out-of-pocket monthly mortgage payment. Most Buy Downs are temporary Cap A limit on an adjustable rate mortgage (ARM) which determines how much the interest rate can increase. A cap is meant to protect the vorrower from large increaes and may be a payment cap, a cap on the amount of interest that can be charged or an annual cap.

Where the buyer pays additional discount points or makes a substantial down payment in return for a below market interest rate; or the seller offers 3 2 1 interest payment plans or pays closing costs such as the origination fee. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.

The option you have to lower the overall interest rate of a home loan by paying more money when you first get the loan. The money you pay-referred to as "discount points"-can reduce the interest rate for the entire life of the loan, or just part of it.

Permanent - prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary - prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.

A subsidy (usually paid by a builder or developer) to reduce monthly payments on a mortgage.

An interest rate buy down is the temporary reduction of the note rate and resulting monthly payments a borrower pays to the lender. The shortfall between the rate on the note and initial payment made by the borrower is usually paid by a third party such as a seller or builder.

1. 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. 2. a loan that has been bought down by the seller of the property for the benefit of the buyer.

Program that allows a borrower to have a start rate that is bought down by borrower or broker. This gives the borrower a lower qualifying ratio.

Funds paid to the lender by the borrower or third party for the pupose of reducing the interest rate of the loan for a specified period of time.

Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage.

An artificial subsidy paid by someone to provide a lower interest rate to the buyer.

The payment of extra money on a loan now so as to reduce the interest rate over a given period or over the life of the loan. This extra payment may be made by the borrower, by the lender (as an incentive to the borrower to borrow from the lender) or by the vendor/builder (as an incentive to the borrower to buy a certain property).

An incentive offered by a developer or seller that allows the buyer to lower his or her initial interest rate by putting up a certain amount of money. A buy down also refers to the process of paying extra points upfront at the closing of your loan in order to have a lower interest rate over the life of the loan.

A payment of discount points in exchange for a lower rate of interest. (See "Discount Points.")

A loan program that allows a borrower to have a lower initial interest rate (start rate). The rate will increase during the first few years of the loan (usually the first 1-5 years) and then level out. The rate is bought down by paying of financing part of the finance charge up front. The advantage to a "buy down" program is that initial payment amount is used in calculating the debt to income ratio.

An arrangement where a party pays a lender an up-front fee, or premium, to reduce ("buy down") a borrower's interest rate on a loan for a temporary time period, usually one to three years. By paying fees up-front to reduce a loan's interest rate, the borrower's monthly payments will be lower. This will also reduce the total amount of interest paid over the life of the loan. The buy down arrangement is usually expressed as two numbers. For example, in a 2/1 buy down, the '2' represents a 2 percent interest rate buy down the first year and the '1' represents a 1 percent interest rate buy down the second year; in the third year of the loan the interest rate would revert to the straight note rate.

A lump sum payment as consideration for the reduction in the interest charged on a loan from that which would normally be charged.

A lower interest rate is offered through a point system set by the lender (buying the rate lower). The rate may last through the life of the loan or for only a year or so. The buy down system is a method for someone to qualify who is not suitable as a potential borrower. With a buy down the monthly payments are lowered.

A fixed rate loan where the interest rate and payment are reduced for a specific period of time by paying the interest up front to subsidize the lower payment.

A fixed-rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time, the borrower's payment is calculated at the note rate. In order to temporarily buy down the initial rate, a lump sum is paid to the lender and held in an account used to supplement the borrower's monthly payment. These funds usually come from the seller as an incentive to induce someone to buy their property.

A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer's periodic payments to repay the indebtedness.

When a lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years on the loan. While the payments are initially low, they will increase when the subsidy expires.

The ability for the borrower to have the interest rate reduced for a period of time (usually one to three years) by paying a portion of the principle up front.

The process of trading money for a lower mortgage rate. The borrower "buys down" the interest rate on a mortgage by paying discount points up front. It can also be a mortgage in which an initial lump-sum payment is made to temporarily reduce a borrower's monthly payments during the first few years of a mortgage.

Cash payments made at closing that allow the borrower to take advantage of lower interest rates for a specific period.

With a buy down, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for an early period in an ARM. The seller may increase the sales price to cover the cost of the buy down. Buy downs can occur in all types of mortgages, not just ARMs.

A fee paid to the lender in order to receive a lower mortgage rate. A 'temporary buy down' is a fee in order to reduce monthly payments in the beginning terms of a mortgage. all Option A mortgage provision that allows a lender to require payment in full at the end of a specified period.

A financing technique used to reduce the monthly payments for the first few years of a loan. Funds in the form of discount points are given to the lender by the builder or seller to buy down or lower the effective interest rate paid by the buyer, thus reducing the monthly payments for a set time.

A cash payment, usually measured in points, to a lender in order to reduce the interest rate a borrower must pay

Payment of additional points to lower the interest rate of the loan.

**Keywords:**margin

Buy On Margin