Buy Down? - Posted by Darla/CO

Posted by thom on December 31, 1999 at 09:49:47:

Means that the seller will pay the lender points up front to reduce the interest rate, so you save on the long term. i.e. Interest rate is 8%, you pay the lender 2 points=$2,000 up front and buy the interest down to 7.75%. Only good if you plan to stay in the house long term, other wise take the discount off the price.

Buy Down? - Posted by Darla/CO

Posted by Darla/CO on December 31, 1999 at 08:28:11:

I am looking at an ad in my local NP and the owner is offering a Buy Down to reduce the interest. I do not understand this term. Please explain the term Buy Down to me. Thank you. Darla

Re: Buy Down? - Posted by Bill

Posted by Bill on December 31, 1999 at 10:09:43:

With a buydown you have a below-market interest rate (it is “bought down”) because either the borrower or the seller have given additional money to the lender up front.

There are different forms of buydowns, most reduce interest costs in the first few years of the loan. For instance, if you pay an extra 1 point up front the interest rate might be reduced by .125 percent over 30 years, or perhaps by .25 percent for four years.

To see if a buydown is a good deal you must compare the reduced monthly cost with the payment up front and the interest you might have earned on the payment up front