Buy down means reducing/lowering the rate of interest on the loan/mortgage through a buy-down or a subsidy for a long-term mortgage, as given by any third-party (developer/builder) for lowering the rates of interest for buyers in the initial years of the same.
A buy down means a specific technique for mortgages, where the buyer tries to get a lower rate of interest for the initial years of the loan. The seller of a property usually offers payments to the lending institution, which reduces the monthly rate of interest for the buyer and subsequently, the payment amount each month. This is done for 1-5 years in most cases. Sellers may sometimes raise prices of properties in order to make up for these costs. In buyer markets, however, they may cover this as an added incentive for property buyers.
Buy down techniques are thus used in several property transactions. Sellers may use this to attract buyers to their properties, especially when markets are down. With higher demand and seller market conditions, they may raise property prices in order to cover these costs as well.
