In the United States, a buydown is a

mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any pu ...

financing technique where the buyer attempts to obtain a lower

interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...

for at least the first few years of the mortgage. The seller of the

property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to consume, alter, share, r ...

usually provides payments to the mortgage

lending In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that de ...

institution Institutions are humanly devised structures of rules and norms that shape and constrain individual behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions a ...

, which, in turn, lowers the buyer's monthly interest rate, and therefore, monthly payment. This is typically done for a period of about one to five years. In a seller's market, the seller might raise the purchase price to compensate for the costs of the buydown, but in most markets, it would not be to their advantage to use a buydown as an enticement if they are going to offset the benefit by raising the price."Homes: Slow-market savings - the 'buy-down'"
CNN Money In most cases, the buydown does not even involve the seller. It is an arrangement between the lender and the buyer. You may also use the buydown option on a refinance.

References

Also similar is paying mortgage points. Contract law Personal finance {{finance-stub

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