Little-known mortgage could make homebuying more affordable

A type of loan that gives homebuyers a lower initial interest rate is coming back into fashion as lenders try to make home ownership more affordable in the midst of high interest rates.

Known as a mortgage buydown, the loan typically involves a cash payment from the seller that effectively lowers the borrower’s mortgage interest rate for a limited time, usually two to three years, before it returns to the full rate. The seller gets the money back as the monthly mortgage is paid. It could give buyers struggling with high housing prices and inflation on groceries and other goods temporary breathing room in their monthly expenses.

Lenders are offering the buyback loans at a time when demand for mortgages is way down because of high interest rates. The average interest rate on a conventional 30-year fixed mortgage declined to 6.61 percent for the week that ended on Nov. 17, down from 7.08 percent the week before. But it is still double the average rate of 3.1 percent one year ago.

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