A reduction in the mortgage payment in the early years of the loan in exchange for an upfront cash payment provided by the home buyer, the seller, or both. As an illustration, a 2-1 buy down on an 8% loan results in a payment in year 1 calculated at 6%, in year two the payment is calculated at 7%, and in year 3 and thereafter it is calculated at 8%. The upfront cash payment must be large enough to cover the difference between the reduced payments made in the first two years by the borrower and the regular payment calculated at 8% received by the lender.
Cornerstone Mortgage
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