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Little-known mortgage could make homebuying more affordable

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A type of loan that gives homebuyers a low initial interest rate is back in vogue as lenders try to make homeownership more affordable amid high interest rates.

Known as a mortgage buydown, this loan typically involves a cash payment from the seller that lowers the borrower’s mortgage interest rate for a period of time (usually two to three years) before returning to full interest. The seller gets the money back once the monthly mortgage is paid. It can give buyers struggling with rising house prices and inflation in food and other commodities a temporary leeway in their monthly spending.

Lenders are offering repurchase loans at a time when demand for mortgages has dropped significantly due to high interest rates. Average interest rates on traditional 30-year fixed mortgages fell to 6.61% in the week ending 17 November from 7.08% the week before. That’s still double the 3.1% average from a year ago.

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