What does a borrower buying down the interest rate on their mortgage loan appear as on the Loan Estimate?

When a borrower decides to buy down the interest rate on their mortgage loan, they pay upfront to lower their interest rate over the life of the loan. This payment is typically represented as a charge on the Loan Estimate. The cost associated with buying down the rate will appear as a specific fee that reflects this upfront payment, which directly impacts the borrower's closing costs.

This process is a common strategy for borrowers who wish to reduce their monthly mortgage payments by securing a lower interest rate. By paying this fee initially, they are effectively investing to achieve long-term savings on their interest payments.

The other options do not accurately reflect this financial transaction; for instance, a credit to the borrower would indicate a benefit or rebate, while a fee waiver suggests that a charge is being eliminated entirely. A penalty charge implies a consequence for the borrower's actions, which does not align with the voluntary choice of buying down the interest rate. Thus, characterizing this as a charge accurately represents the nature of the transaction involved in this mortgage financing strategy.