Finance
What is 'buy-down' mortgage financing and how might it benefit Hawaii buyers in a high-rate environment?
AA. A program where the seller reduces the price to lower the buyer's costs
BB. Paying additional points or fees upfront to reduce the interest rate for the life of the loan (permanent buy-down) or for the initial years only (temporary buy-down)✓ Correct
CC. A government subsidy reducing mortgage rates for low-income Hawaii buyers
DD. A lender's automatic rate reduction when the buyer makes extra principal payments
Explanation
A mortgage buy-down reduces the interest rate by paying additional points upfront. A permanent buy-down reduces the rate for the loan's life. A temporary buy-down (like a 2-1 buy-down) reduces the rate for the first 2 years (2% below in year 1, 1% below in year 2). Sellers sometimes offer temporary buy-downs as concessions to attract buyers in slow markets.
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