This mortgage is similar to the two-step mortgage in that it is usually expressed in terms of numbers. It involves an initial lump sum payment made by any party, builder, seller, buyer, or others, to reduce the interest actually paid and lower the monthly payments. The most common is the 3-2-1 buy down, which by title indicates that the interest rate is reduced by 3% the first year, 2% the second year, and 1% the third year. Depending on the mortgage terms, the remainder of the payments on the loan may be a specified interest rate or one tied to an interest index rate.
- Why should I try to buy down my interest rate on a mortgage?
- What are my options if I was turned down for a mortgage because I have no or a small down payment?
- Can I cosign for my son’s mortgage if I want to help my son buy his first home?
- How much money will I save with mortgage interest deductions and will it allow me to buy bigger property?
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