Call 605-340-1339 for a quick home loan quote.
Buy Down Information
What is a Buy-Down?
A buy-down is a mortgage financing option that allows you to lower your initial interest rate and monthly payments by paying an upfront fee or points at the time of closing. This upfront payment is used to "buy down" or reduce the interest rate either permanently or temporarily.
Understanding Your Buy-Down Options:
Discount points, also referred to as mortgage points or prepaid interest points, are a one-time fee paid upfront. In the case of discount points, the interest rate is lower for the loan term.
A temporary rate buydown in mortgage lending refers to a financing arrangement where a borrower pays an upfront fee or "points" at the time of closing to temporarily reduce the interest rate on their mortgage for a predetermined period, such as the first one, three, or five years of the loan term. After this initial period, the interest rate typically reverts to the original agreed-upon rate.
Buydowns are most beneficial when a seller or builder offers to pay the discount points on behalf of the buyer without significantly increasing the purchase price of the home. However, if the buyer intends to pay the points themselves, there are certain circumstances in which mortgage buydowns are more suitable.