Save Money With a Mortgage Rate Buydown

A second mortgage allows you to obtain a loan, and gives the lender the right to take your property if you fail to repay the money you've borrowed. Africa Studio/Shutterstock

A mortgage is usually the most significant monthly expenditure that people have. The 28 percent rule is that a mortgage makes up about 28 percent of a monthly income. That makes keeping that monthly payment down a priority.

There is a way to temporarily lower a monthly mortgage. A mortgage rate buydown can help. But what is it, how can it be used, and when is it worth it?

Buydown Reduces Interest

Often called a “buydown,” a mortgage rate buydown reduces the mortgage’s interest rate. It requires the homebuyer to pay money upfront to secure this. The buyer also must pay “discount points,” which are an additional closing cost.