Business and Personal Finance Dictionary

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• INITIAL RATE
  
  Some lenders offer initial ARM rates that are lower than the sum of the index and the margin. Such rates, called discounted rates, are often combined with large initial loan fees ("points") and with much higher interest rates after the discount expires. Additionally, very large discounts are often arranged by the seller. The seller pays an amount to the lender, who then provides you a lower rate and lower payments early in the mortgage term. This arrangement is referred to as a "seller buydown." Utilizing such, the seller may increase the sales price of the home to cover the cost of the buydown while actually decreasing the buyer's monthly payment.
  
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