Buy Down Often used by home builders and increasingly by individuals. Lender qualifies buyer at lower interest rate. Typically used by buyers who cannot afford high mortgage payments at the start but expect their incomes to grow. Loan terms are fixed for 25 to 30 years. Monthly payments typically are fixed as though they are for 25 to 30 years at outset, but begin increasing 3 to 7 percent a year after the third year.
Additional payment goes towards principal.
Home buyer's equity grows faster than under other mortgages. Loan is paid off in 12 to 18 years. Remember, the foregoing is a brief illustration of only some types of mortgages. It is not intended and should not be a method by which to determine how to finance your home. It is imperative that you seek proper and competent advice and that you analyze very thoroughly what one particular type of mortgage calls for as opposed to another.