Definition
Paying an upfront amount to reduce the mortgage interest rate, either temporarily for the first years or permanently for the loan term.
Example
A 2-1 buydown reduced the rate by two points in year one and one point in year two before reverting.
Related terms
- Acceleration Clause
- Accrued Interest
- Adjustable Rate Cap
- Adjustable-Rate Mortgage
- Amortization
- Annual Percentage Rate
Frequently asked questions
What does Buydown mean in real estate?
Paying an upfront amount to reduce the mortgage interest rate, either temporarily for the first years or permanently for the loan term.
How is Buydown used in practice?
A 2-1 buydown reduced the rate by two points in year one and one point in year two before reverting.
This definition is provided for educational purposes. Legal and tax terminology can carry jurisdiction-specific meaning — confirm with a licensed professional before relying on it in a transaction.