Finance
What is a buydown in mortgage financing?
APaying off a mortgage early
BPaying discount points upfront to reduce the interest rate✓ Correct
CBuying down the principal balance
DA reduction in the sales price
Explanation
A buydown involves paying discount points (prepaid interest) at closing to reduce the mortgage interest rate. Each point equals 1% of the loan amount. A 2-1 buydown reduces rate by 2% in year 1 and 1% in year 2.
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