What is a 'Buydown'
A buydown is 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 mortgage-lending institution, which, in turn, lowers the buyer's monthly interest rate and therefore monthly payment. The home seller, however, increases the purchase price of the home to compensate for the costs of the buydown agreement.
Buy-down – This is a buyer incentive in which the lender subsidizes your mortgage by lowering the interest rate. During the first few years, the loan payments will be lower. Buy-downs generally last from one to five year