If you’ve been house hunting lately or even just browsing real estate listings, you might have heard the term “seller-paid interest rate buydown” floating around. It sounds kind of technical, but don’t worry—it’s actually a pretty simple (and helpful!) concept once you break it down.
Let’s walk through it together.
What Is a Seller-Paid Interest Rate Buydown?
A seller-paid interest rate buydown is when the home seller agrees to help reduce the buyer’s mortgage interest rate—either temporarily or for the life of the loan—by paying a fee at closing.
This is a way to make the monthly mortgage payments more affordable for the buyer, which can be a big win, especially when interest rates are on the higher side.
It’s also a great way for a seller to attract more buyers in a slower market. Think of it like an incentive or bonus the seller offers to sweeten the deal.
How Does It Work?
Let’s say you’re buying a house and your lender quotes you a 7% interest rate. That rate could make your monthly payment feel a bit out of reach. But the seller offers to “buy down” your rate to 6% for the first year. That 1% drop could save you hundreds of dollars every month!
Here’s the breakdown:
Option 1: Temporary Buydown (e.g., 2-1 Buydown)
This is when the seller pays to lower your rate for the first 1–2 years of your mortgage.
For example:
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Year 1: 2% lower (you pay 5% interest)
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Year 2: 1% lower (you pay 6% interest)
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Year 3 and beyond: you pay the full 7%
This gives you a little breathing room at the beginning while you get settled.
Option 2: Permanent Buydown
In this case, the seller helps cover the cost of permanently reducing your interest rate for the life of the loan. You’ll pay less every month from day one—and forever.
Where Does the Money Come From?
The seller pays this buydown cost out of their proceeds from the home sale, kind of like how they might pay for closing costs or offer a credit toward repairs. It’s negotiated as part of the offer.
Why Would a Seller Agree to This?
Great question! Sellers might offer a buydown to:
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Attract more buyers
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Help a deal move faster
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Stand out in a competitive market
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Avoid dropping the listing price
It’s a win-win: buyers get a more affordable monthly payment, and sellers may sell quicker—often without taking a price cut.
Is a Seller-Paid Buydown Right for You?
If you’re buying a home and feel a little squeezed by interest rates, this could be a great option to explore. Talk to your lender and your real estate agent (hi!) to see if it makes sense for your budget and goals.
And if you’re a seller, it’s a smart tool to keep in your back pocket—especially if you’re having trouble standing out or want to avoid price reductions.
Still have questions about how a seller-paid interest rate buydown works? Reach out anytime—I’m always happy to chat real estate and help you make sense of your options!
