Finance
A 'buy-down' mortgage in Connecticut is one where:
AThe buyer purchases the property below market value
BPoints are paid upfront to reduce the interest rate for all or part of the loan term✓ Correct
CThe lender reduces the principal balance at closing
DThe seller finances part of the purchase price
Explanation
A buy-down involves paying points (upfront interest) to reduce the mortgage interest rate, either permanently or for an initial period (e.g.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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