Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
What Is a Mortgage Buydown?
A mortgage buydown is essentially paying to have a lower interest rate. You will pay an upfront fee and in return get a lower rate on your loan. This lower rate is temporary however. You will take the current rate being offered, perhaps 5.5 percent, and then buy it down to 3.5 percent. The loan will be fixed at 5.5 percent for the entire thirty years, but the first year it will be at 3.5 percent, then the second year it will be 4.5 percent, and then the third year it will expand to the initial rate of 5.5 percent for the rest of the life of the loan. The difference is the actual interest rate, and the lower rate, must be paid by the buyer or the seller at closing. So a lump sum will be paid and in exchange the buyer has a lower rate for a few years.
- FHA Loans for a First-Time Home Buyer
- Alternatives to Getting a 2nd Mortgage
- Home Equity Loans for People with Bad Credit
- What To Do When Mortgages Default
- Second Mortgages: Advantages and Disadvantages
- 3 Common Short Sale Mistakes
- FHA Eligibility with Bankruptcy and Foreclosure
- Appraisal Basics
- Low Down Payment Loan Qualification