Which mortgage option allows for an initial lower interest rate?

A buy-down mortgage is characterized by an initial lower interest rate, which is achieved through a lump-sum payment made at the beginning of the loan term. This payment effectively "buys down" the interest rate for a set period, allowing the borrower to benefit from lower monthly mortgage payments initially. This can be particularly appealing for buyers who anticipate an increase in their income over time, as it provides immediate cash-flow relief.

In contrast, a fixed-rate mortgage locks in a consistent interest rate for the life of the loan, which means that the borrower does not experience a lower rate initially. Conventional mortgages, which can be either fixed-rate or adjustable-rate, do not inherently offer an initial lower interest rate without the specific terms of a buy-down. Reverse mortgages are entirely different products designed for seniors, allowing them to convert equity in their homes into loan proceeds, but they don't involve the idea of lower initial rates for the borrower in the same way.

Thus, the buy-down mortgage is specifically designed to provide that initial interest rate benefit, making it the correct choice in this context.