A buy down is obtaining a lower interest rate by paying additional points to the lender to buy down the rate. The lower rate may apply for the full duration of the loan or for just the first few years depending on the type of buy down.

Example: A popular type of buy down is the 2-1 buy down. If the interest rate on the note is 8%, the buy down results in the rate being 6% (8%-2%) for the first year, 7% (8%-1%) for the second year, and 8% thereafter.