Oct 20, 2026 · @Bill McMaken
When most buyers write an offer, their first instinct is to ask for a lower price. It feels like winning. But in today’s market, there’s a move that can put a lot more money back in your pocket each month: asking the seller to pay for a rate buydown.
Here’s what a buydown is, how the math stacks up against a price cut, and how we work one into your offer here in Reno and across Northern Nevada.
What is a rate buydown?
A rate buydown is prepaid interest. Someone pays money up front at closing to lower your mortgage interest rate. That someone can be you, a builder, or, ideally, the seller.
There are two main types:
- Permanent buydown. You buy “discount points” to lower your rate for the life of the loan. One point costs 1% of your loan amount and often lowers your rate by around a quarter of a percent, though that varies by lender and market.
- Temporary buydown (the 2-1). Your rate drops 2% in year one and 1% in year two, then settles at the full note rate in year three. Think of it as training wheels for your mortgage payment while you settle in, furnish the place, and recover from moving day.
The math: price cut vs. buydown
The same $11,900 from the seller saves about $83 a month as a price cut, but about $657 a month in year one as a 2-1 buydown. Here’s the example, using a $500,000 loan at 7.5% (30-year fixed, principal and interest only):
| Option | Rate | Monthly payment | Monthly savings |
|---|---|---|---|
| No concession | 7.5% | $3,496 | n/a |
| $11,900 price cut | 7.5% | $3,413 | $83 |
| 2-1 buydown, year 1 | 5.5% | $2,839 | $657 |
| 2-1 buydown, year 2 | 6.5% | $3,160 | $336 |
| 2-1 buydown, year 3+ | 7.5% | $3,496 | $0 |
The roughly $11,900 cost of the buydown is simply the two years of payment savings, paid up front.
For comparison, a permanent buydown of one point ($5,000) that drops the rate to 7.25% saves about $85 a month for the life of the loan. That breaks even in about five years, so it makes the most sense if you plan to stay put.
Numbers are illustrative. Your actual rate, payment and buydown cost depend on your lender, credit and loan program.
How to work a buydown into your offer
The ask goes in your offer as a seller credit toward closing costs and a rate buydown, not as a price reduction.
- Talk to your lender first. Confirm which buydown options they offer, what each costs, and your seller-contribution limit.
- Pick the right home to ask on. Listings that have been on the market a while, or have had a price reduction, are often the most open to creative terms.
- Write the credit into the offer. We request a specific dollar amount from the seller to be applied to your closing costs and/or rate buydown. Your lender applies it at closing.
- Frame it as a win for the seller. The seller’s net is about the same as a price cut, their sale price stays stronger for the neighborhood comps, and you get a much bigger monthly benefit.
- Get the buydown details in writing. Your lender’s Loan Estimate and Closing Disclosure should show exactly how the credit is being used.
Things to know before you ask
- Seller contributions are capped. Each loan program limits how much a seller can contribute, and the limit can depend on your down payment. Your lender will confirm your exact number.
- You qualify at the full rate. With a temporary buydown, lenders generally qualify you at the full note rate, so plan on being comfortable with the year-three payment.
- Refinancing early. If rates drop and you refinance during the buydown period, unused buydown funds are typically applied to your loan rather than lost. Confirm how your lender handles it.
- Price still matters for the appraisal. A credit doesn’t lower the contract price, so the home still has to appraise at the agreed price.
Is a buydown right for you?
A buydown is a great fit if you want a lower payment while you settle in, expect your income to grow, or are buying a home that’s been sitting on the market. A permanent buydown makes more sense if you plan to stay long-term. Sometimes the answer is a mix of a small price cut and a buydown, and that’s where running the numbers together pays off.
The best deal isn’t always the lowest price. Sometimes it’s the lowest payment.
If you’re buying in Reno, Sparks or anywhere in Northern Nevada and want to see how a buydown could work on a home you’re eyeing, let’s talk. I’m happy to sit down with you and your lender and run the numbers.
Bill McMaken | Real Estate Professional | Berkshire Hathaway HomeServices Drysdale Properties | RED#205069 | (775) 221-5782
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