What is an interest rate buy down for a temporary period of time called?

An interest rate buy down for a temporary period is referred to as a Temporary Interest Rate Buy Down. This financing technique allows the borrower to pay an upfront fee to the lender, which reduces the interest rate for a certain period, usually the first few years of the loan. During this temporary period, the borrower benefits from lower monthly payments, making homeownership more affordable during the initial phases of the loan.

This concept is particularly appealing for first-time homebuyers or those expecting an increase in income in the near future, as it helps ease the financial burden at the start. After the set temporary period ends, the interest rate reverts to the original note rate, which is usually higher than the lowered rate.

The other options pertain to different concepts: a Permanent Rate Buy Down permanently lowers the interest rate for the life of the loan, an Adjustable Rate Buy Down involves interest rates that can fluctuate over time based on a set index, and a Variable Rate Buy Down typically describes a strategy similar to adjustable rates, where payments can change; none of these accurately describes the temporary reduction in rate that a Temporary Interest Rate Buy Down signifies.