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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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38% - Moderately

Buy-down


Synonyms:discount, pay down, reduce, sale
Filed Under: mortgages
Tags: mortgage
 

Definition of buy-down

buy-down
1. The option of buying a lower mortgage rate. The borrower "buys down" the interest rate on a mortgage by paying discount points when the loan is first initiated. It can also be a mortgage where an initial lump-sum payment is made to temporarily reduce a borrower's monthly payments during the first few years of the mortgage.

Related Terms and Acronyms:

  • basis point (BPS)   A unit of measure: 1/100th of one percent. For example, the difference between a 9.0% loan and a 9.5% loan is 50 basis points.
      ➥  Used by mortgage brokers and lenders when discussing mortgage rates and determining commissions.
  • buy-down mortgage   A home loan in which the lender charges below-market interest in exchange for discount points.
  • commission (comm)   A fee paid to a salesperson for selling a product to a customer.
  • discount point   A sum a borrower pays to a lender to decrease the interest rate of a mortgage. A point equals 1 percent of the loan amount.
  • down payment   The portion of the purchase price a buyer pays, in cash, at the time the loan originates.
  • gift from a family member   A gift of cash, to a mortgage applicant from a relative by blood or marriage, which the applicant is not required to repay. In some instances it is necessary to provide a written statement to that repayment is not required.
  • low-down mortgages   Mortgages with a low down payment, usually less than 10 percent.
  • margin   The difference between the cost and the selling price.
  • point   A point equals 1 percent of a mortgage loan. Some lenders charge "origination points" to cover expenses of making a loan. Some borrowers pay "discount points" to reduce the loan's interest rate.
  • shared-appreciation mortgage (SAM)   A home loan in which the lender offers a below-market interest rate in exchange for sharing in the profit when the home is sold. Usually done only with private funds/lenders.

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