Buying a home is one of the biggest financial decisions most people will ever make. With fluctuating interest rates and rising home prices, many buyers are looking for creative ways to make their mortgages more affordable. One option that's gaining traction is the mortgage rate buydown. But what exactly is a buydown, and how can it benefit you as a homebuyer?
What Is a Mortgage Rate Buydown?
A mortgage rate buydown is a financing arrangement that allows borrowers—or sometimes sellers or builders on behalf of the buyer—to pay an upfront fee to reduce the interest rate on a mortgage for a period of time or for the entire loan term. This lower rate translates to lower monthly mortgage payments.
Buydowns typically come in two main forms:
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