Buydown

A buydown is a mortgage financing technique where the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage. [ [http://dictionary.reference.com/browse/buydown "Definition of buydown"] , Dictionary] The seller of the property usually provides payments to the mortgage lending institution, which, in turn, lowers the buyer's monthly interest rate and therefore monthly payment. This is typically done for a period of about one to five years.In a seller's market the seller might raise the purchase price to compensate for the costs of the buydown but in most markets it would not be to their advantage to use a buydown as an enticement if they are going to offset the benefit by raising the price. [ [http://money.cnn.com/2006/11/13/real_estate/the_buy_down/index.htm?postversion=2006111316 "Homes: Slow-market savings - the 'buy-down'"] , CNN Money] In most cases, the buydown does not even involve the seller. It is an arrangement between the lender and the buyer.

You may also use the buydown option on a refinance.

References


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Look at other dictionaries:

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  • Buydown — A mortgage financing technique with which the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage, but possibly its entire life. The builder or seller or the property usually provides payments to the… …   Investment dictionary

  • buydown — noun a) An accelerated repayment of the principal of a loan. b) A payment by a third party to a lender to reduce some of all of the payments otherwise required, especially in first few years of the loan, thereby enhancing the apparent quality of… …   Wiktionary

  • buydown — A lump sum payment made to a creditor by a borrower or a third party to reduce the amount of some or all of the borrower s periodic payments to repay the indebtedness. American Banker Glossary 1) A lump sum payment made to the creditor by the… …   Financial and business terms

  • buydown — / baɪdaυn/ noun US the action of paying extra money to a mortgage in order to get a better rate in the future …   Dictionary of banking and finance

  • buydown — Fin the payment of principal amounts that reduce the monthly payments due on a mortgage …   The ultimate business dictionary

  • 3-2-1 Buydown — A type of mortgage with a series of three initial temporary start interest rates that increase in a stair step fashion until a permanent interest rate is reached. Lenders will charge for the temporary interest rate reductions. A 3 2 1 buydown is… …   Investment dictionary

  • 2-1 Buydown — A type of mortgage with a set of two initial temporary start interest rates that increase in stair step fashion until a permanent interest rate is reached. The initial interest rate reductions are either paid for by the borrower in order to help… …   Investment dictionary

  • builder buydown loan — A mortgage loan on newly developed property that the builder subsidizes during the early years of the development. The builder uses cash to buydown the mortgage rate to a lower level than the prevailing market loan rate for some period of time.… …   Financial and business terms

  • Builder buydown loan — A mortgage loan on newly developed property that the builder subsidizes during the early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the prevailing market loan rate for some period of time.… …   Financial and business terms


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