Legal Definitions - buy-down

Definition: Buy-down is a term used in real estate that refers to the money paid by the buyer of a house to reduce the mortgage-interest payments.

Let's say you are buying a house for $300,000 and you have a 30-year mortgage with an interest rate of 5%. You can negotiate with the seller to pay an extra $10,000 upfront, which will lower your interest rate to 4%. This $10,000 payment is called a buy-down.

Another example could be if you are buying a new construction home and the builder offers a buy-down incentive. They may offer to pay a certain amount of money upfront to lower your interest rate for the first few years of your mortgage.

These examples illustrate how a buy-down works by reducing the amount of interest paid over the life of the loan. By paying extra upfront, the buyer can save money in the long run and have lower monthly mortgage payments.