Carney, Ford Announce $8.8B Deal To Cut ON Development Charges By Up To 50%

Buy-Down Mortgage

Understand buy-down mortgages in Canadian real estate — how they work, their benefits, and when they’re used.

Buy-Down Mortgage

July 27, 2025


What is a Buy-Down Mortgage?

A buy-down mortgage is a loan where the interest rate is temporarily or permanently reduced through upfront payments made by the borrower or a third party.

Why Buy-Down Mortgages Matter in Real Estate

In Canadian real estate financing, buy-downs can make homeownership more affordable in the early years or help sellers/investors incentivize purchases.



Types:
  • Temporary (e.g., 3-2-1 buy-down)
  • Permanent (lower rate for full term)



Understanding buy-down mortgages helps buyers assess cost-benefit and long-term affordability.

Example of a Buy-Down Mortgage in Action

The builder offered a buy-down mortgage incentive, covering points to lower the buyer’s interest rate for the first three years.

Key Takeaways

  • Interest rate lowered via upfront payment
  • May be temporary or permanent
  • Used to improve affordability
  • Often funded by builders or sellers
  • Requires cost-benefit analysis

Related Terms

Additional Terms

Public Realm Improvements

Public realm improvements are enhancements to public spaces such as sidewalks, parks, plazas, and streetscapes, often funded or contributed by. more

Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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