Temporary Interest Rate Buydowns Sample Clauses

Temporary Interest Rate Buydowns. Temporary interest rate buydowns are designed to reduce the borrower's monthly payment during the early years of the mortgage. At closing, an escrow account is established. Each month, the servicing lender draws down an amount equal to the difference between the principal and interest payment (P&I) at the Note rate, and the P&I at the buydown rate. The borrower must be qualified based on the note rate without consideration of the bought-down rate. If reserves are required, the reserves must be calculated using the Note Rate. The mortgage instruments must reflect the permanent payment terms rather than the terms of the buydown plan. In no event, may the buydown plan change the terms of the mortgage Note.