Buy-Down

[SlideRule]

" buy-downs play an important role in financing of homes, particularly when interest rates are high. The expression buy-down, simply stated, means that the seller will buy down the relatively high interest rate that the lender demands to a lower rate. This is usually accomplished by the seller paying a lump sum to the lender requesting the discounted value of the interest rate for the term agreed. Generally the builder will buy down the loan for only a relatively short term, varying from one to seven years. "
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ps: an equation would be helpful