Seller-Paid Rate Buydown vs. Price Reduction: Which Actually Saves You More

Sellers in softer segments are increasingly open to concessions. The most useful question is not whether to ask for one, but which form of concession puts the most money back in your pocket.

Price reduction

A $15,000 price cut on a $900,000 home reduces the loan amount by roughly $12,000 after your down payment. On a 30-year loan at 6.75 percent, that is about $78 a month lower. Real savings, but modest.

Temporary buydown

The same $15,000, applied as a 2-1 buydown, reduces your rate by 2 percent in year one and 1 percent in year two before returning to note rate in year three. On an $850,000 loan, that is closer to $1,100 per month in year-one savings, roughly $600 per month in year two.

Total first-two-year savings often exceed $20,000, meaningfully more than the equivalent price cut, and unused buydown funds are applied to principal if you refinance early.

Permanent buydown

For buyers planning to stay put, a permanent rate buydown (paying discount points) may beat both. The right choice depends on the expected time in the loan. Rule of thumb: if you plan to hold more than five to seven years, points usually win. Under three years, temporary buydowns or price cuts win.