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Home > Real Estate Glossary

Term: Buydown

Definition: Buying down is a term used to describe a purchased reduction in interest rates and payments. For example, a developer may pay a lender sufficient cash to bring the interest rates on a home mortgage down three or four points for a period of three years. That allows the buyer to qualify at this income level, although the rate will climb to market level for him in the fourth year. This is a common buydown, although the developer may spread the cash payments under certain other arrangements.

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