The seller just agreed to give you $15,000. Nice work. Now comes the hard part: deciding where that money goes.
You’re in good company. In August, 44.7% of home sales included seller concessions, and Redfin called it the strongest buyer’s market in its records dating back to 2013. Sellers are paying, so walk in with a plan for the money.
Here’s why it’s tricky. The same $15,000 can lower your price, lower your rate for two years, or lower your rate for the life of the loan. Each one leaves you with a very different amount of money five years from now. With the 30-year average at 7.28% as of Oct. 1, the highest in nearly three years, the choice matters more than it did when rates started with a 6.
It’s easy to pick whichever option sounds best at the closing table. Run the numbers first. Below are the three ways to use seller money, from my least favorite to my favorite, plus the one number that can flip the whole answer.
How seller money works, and how much a seller can pay
A rate buydown means the seller pays your lender at closing to lower your interest rate. The money buys discount points, and one point costs 1% of your loan amount. A permanent buydown lowers your rate for the life of the loan. A temporary buydown, like a 2-1, lowers it for the first year or two, and then it goes back up.
Sellers can’t pay an unlimited amount. Your loan type sets the cap:
- Conventional, less than 10% down: 3% of the price
- Conventional, 10% to 25% down: 6%
- Conventional, more than 25% down: 9%
- FHA: 6%
- VA: 4%, and buydowns generally count toward it
Know your cap before you write the offer.
What $15,000 actually does
Here’s the same $15,000 on a $500,000 home with 10% down at 7.28%, principal and interest only:
| Option | Rate | Monthly payment | Saves you |
|---|---|---|---|
| No help | 7.28% | $3,079 | |
| Price cut to $485,000 | 7.28% | $2,987 | $92/mo |
| 2-1 temporary buydown | 5.28%, then 6.28%, then 7.28% | $2,493, then $2,780, then $3,079 | $586, then $299, then $0 |
| Permanent buydown | 6.45% | $2,829 | $250/mo |
The payment is only half the story. Here’s how each one plays out.
3. The 2-1 temporary buydown
My least favorite
How it works
The seller’s money goes into an account that covers part of your payment. Your rate is 2% lower in year one, 1% lower in year two, and back to the full rate in year three. In this example, the buydown costs $10,621, and the other $4,379 goes toward your closing costs.
Pros
- The cheapest first year of the three. Your payment drops $586 a month in year one.
Cons
- You still qualify at the full rate. The lender approves you at 7.28%, so it doesn’t help you afford more house.
- It runs out. In year three, you’re paying the full $3,079.
- It costs you over time. Five years in, you’re $4,787 behind where the price cut would have left you.
Why it ranks last
The 2-1 was very popular for a while. The pitch was simple: enjoy the low payment now and refinance before it runs out. I’ve had clients use one and watched it expire, and they’re still paying the full rate today because rates haven’t come down enough to refinance. A 2-1 is a bet that rates fall within two years. If you can’t comfortably afford the year-three payment, don’t take that bet.
2. The price cut
Best if you’ll move or refinance within five years
How it works
The seller drops the price from $500,000 to $485,000. Your loan drops to $436,500, and your down payment shrinks by $1,500.
Pros
- You owe $13,500 less from day one.
- It doesn’t depend on lender pricing. A dollar off the price is a dollar off the price.
- The appraisal gets easier, because the house only has to appraise at $485,000.
Cons
- It barely moves your payment. You save $92 a month.
Why it ranks second
Because you owe less and put less down, the price cut keeps you ahead for roughly the first five years. If you plan to sell or refinance before then, take the price cut. It’s also the right call if you’d rather owe less than pay less each month. Some of my clients are true math nerds, and that’s exactly the trade they want.
1. The permanent buydown
My favorite, nine times out of ten
How it works
The $15,000 buys about 3.3 points, which takes your rate from 7.28% to about 6.45% for the life of the loan. Lenders sell partial points, so the seller’s full credit goes to work.
Pros
- The biggest monthly savings. You save $250 a month, about 2.7 times what the price cut saves.
- It pulls ahead in about five years. By year 10, you’re $13,486 ahead of the price cut.
- Seller-paid points count as if you paid them, so they may be deductible if you itemize. Ask your tax pro.
Cons
- Refinance early and it’s gone. Refinance at year two, and the price cut would have left you $9,424 better off.
Why it’s my favorite
Most people want to optimize for cash flow, and the permanent buydown is where the cash flow is. Today’s rates make the case even stronger. Fannie Mae and the Mortgage Bankers Association both expect the 30-year to sit around 6.8% at the end of 2026, and those forecasts came out before rates topped 7%. With a permanent buydown, you’d already be at 6.45%.
In other words, you’re buying your refinance today, without paying for a second closing. If you plan to stay five years or longer, ask for the permanent buydown.
The one number that can flip the answer
Everything above assumes one point lowers your rate by about 0.25%. That’s the rule of thumb from Freddie Mac and Bankrate, but it varies by lender, by loan, and by the day you lock. Here’s how much it matters:
| What 1 point buys | Buydown pulls ahead after |
|---|---|
| 0.25% | 5.3 years |
| 0.20% | 7.2 years |
| 0.15% | 11.2 years |
At 0.15%, the price cut wins for almost everyone. Before you write the offer, get your lender’s point pricing in writing and run the break-even on your real numbers.
One more watch-out. A buydown keeps the contract price high, and the house still has to appraise at that price. If it comes in low, you’ll cover the gap in cash or head back to the negotiating table. You can’t pay more for the house than it’s worth just because they’re giving you a buydown. Make sure the price holds up on its own before you trade it for a lower rate.
Frequently asked questions
What is a seller-paid rate buydown?
The seller pays your lender at closing to lower your mortgage rate. A permanent buydown lowers it for the life of the loan. A temporary one, like a 2-1, lowers it only for the first year or two.
Is a rate buydown better than a price reduction?
Usually, if you keep the loan about five years or longer. In a $500,000 example at 7.28%, $15,000 toward points saved $250 a month, against $92 for the same price cut, and pulled ahead in about 5.3 years.
How much can a seller pay toward a buydown?
On a conventional loan, 3% of the price with less than 10% down, 6% with 10% to 25% down, and 9% with more than 25% down. FHA allows 6%. VA caps seller concessions at 4%, and buydowns generally count toward it.
Is a 2-1 buydown worth it?
Only if you need a lower payment for the first two years. You still qualify at the full rate, and over time it leaves you with less than a price cut would have.
What happens to my buydown if I refinance?
It’s gone. The points stay with the old loan, so if you refinance within about five years, the price cut would have left you with more money.
Want to know which one wins for your move? Bring me your lender’s quote, and we’ll run the break-even together. Book a time here.
Selling your current home too? Read buy first or sell first before you list.
Math notes: $500,000 price, 10% down, 30-year fixed at 7.28% (Freddie Mac PMMS, Oct. 1, 2026), principal and interest only. Taxes, insurance, and PMI are excluded. $15,000 of seller money is 3% of the price. Permanent buydown: 3.33 points at about 0.25% per point, giving 6.45%. 2-1 buydown: 5.28% in year one and 6.28% in year two, costing $10,621. “Ahead” compares what you’d walk away with if you sold: cash saved at closing, minus payments made, minus loan balance. Break-even is 64 months. Sources: Freddie Mac PMMS, Freddie Mac on discount points, Bankrate on mortgage points (Sept. 30, 2026), Fannie Mae Selling Guide B3-4.1-02, Fannie Mae B2-1.4-04 temporary buydowns, VA closing costs and concessions, HUD FHA interested party contributions, IRS Topic 504, Redfin concessions via Inman (Sept. 18, 2026), Fannie Mae and MBA forecasts via National Mortgage News (Sept. 21, 2026).
