3-2-1 Buydown
3-2-1 Buydown
A 3-2-1 Buydown is a feature that allows for a temporary interest rate reduction on a fixed-rate mortgage. In exchange for an upfront fee, the lender lowers the mortgage's permanent rate by 3 percent in the first year, 2 percent in the second year, and 1 percent in the third year. In the fourth year, the mortgage resets to its permanent rate. Sellers sometimes pay for the buydown as an incentive to buyers. Buydowns are used on purchases only.
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