COMPRESSED BUY-DOWN


In real estate, a compressed buy-down is a type of mortgage financing technique that allows the buyer to obtain a lower interest rate for the first year or two of the mortgage.

A compressed buy-down is similar to a regular buy-down, but the interest rate is reduced by a larger amount in the first year or two of the mortgage 1. This can help the buyer save money on interest payments during the early years of the mortgage.

For example, a compressed buy-down might reduce the interest rate by 2% in the first year of the mortgage, and then by 1% in the second year 1. After the second year, the interest rate would return to the original rate.

Compressed buy-downs are often used by builders or sellers to make a property more attractive to buyers. They can also be used by buyers who want to save money on interest payments during the early years of the mortgage.


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