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Rate Reduction Option
Updated
January 19, 2023
A Reduction-option loan is a mortgage loan with features of both fixed-rate and adjustable-rate mortgages. A reduction-option loan is a fixed-rate mortgage, but the rate can be reduced if interest rates fall by a particular amount in a year. Typically, this decrease must be at least 2%. If this occurs, the new, lower interest rate becomes the mortgage's interest rate for the term.
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