Finance
A Mississippi lender offers a 2/1 buydown on a mortgage. This means the interest rate is:
A2% below market for the life of the loan
BReduced by 2% in year 1, 1% in year 2, then at the full rate from year 3 onward✓ Correct
CFixed for 2 years, then adjustable for 1 year
DDiscounted if the buyer pays 2 points at closing
Explanation
A 2/1 buydown temporarily reduces the interest rate: 2% below the note rate in year 1, 1% below in year 2, and the full note rate from year 3 forward. The cost of the reduced payments is typically funded by the seller or builder.
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