A buydown is a mortgage financing technique in which the borrower pays an upfront fee in exchange for a lower interest rate. Buydowns can be a smart investment for borrowers who plan to stay in their home for a long period. Lenders often offer buydowns to attract borrowers and compete with other lenders. Buydowns can be structured in different ways, such as a 2-1 buydown or a 3-2-1 buydown, each with benefits and costs.
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