Buydown
Paying money upfront to lower a loan's interest rate, either for the full term or temporarily for the first year or two. Sellers and builders often pay for buydowns as a concession.
Also called: rate buydown, 2-1 buydown, temporary buydown, permanent buydown
Related terms
Upfront fees paid to the lender at closing to lower the interest rate. One point equals 1% of the loan amount. Paying points makes sense mainly if you keep the loan long enough to recover the cost.
The percentage a lender charges to borrow money, used to figure the interest part of each payment. It does not include fees, which is why the APR is often higher.
Money the seller agrees to put toward the buyer's closing costs, prepaid items or rate buydown. Loan programs cap how much a seller can contribute.
A home that is newly built or still being built, usually sold by the builder. Builder contracts differ from resale contracts, and the sales rep works for the builder.
The yearly cost of a loan including the interest rate plus certain fees, such as points and origination charges. It is usually higher than the interest rate and makes it easier to compare offers from different lenders.