Examples of seller-paid temporary buydowns and costs
“You can get a rate buydown that’s one year, two years, or three years, and of course, that corresponds to different levels of cost,” Paris explains. “But instead of lowering your home’s price, it’s a great way to affect the buyer’s monthly payment in a way you couldn’t otherwise.”
Below are the four most common seller-paid temporary buydown offers and cost examples based on a buyer with a 30-year, $400,000 loan using a 6.5% base interest rate.
1-0 buydown
The seller covers a 1% reduction in the buyer’s mortgage rate for the first year of the loan. After that, the rate adjusts to the full note rate for the remaining term. This option is often the least expensive for the seller and still gives the buyer a modest break in their first year of ownership.
| Year | Rate | Monthly payment | Monthly savings | Annual savings |
| 1 | 5.50% | $2,269 | $257 | $3,086 |
| 2 | 6.50% | $2,526 | $0.00 | $0.00 |
Seller’s buydown total cost: $3,086
1-1 buydown
With this structure, the buyer’s mortgage rate is reduced by 1% in the first year and 1% in the second year before returning to the full note rate in year three. It offers moderate but steady savings during the early years of the loan and can be a good middle-ground option for sellers who want to offer an incentive without committing to a more expensive buydown strategy.
| Year | Rate | Monthly payment | Monthly savings | Annual savings |
| 1 | 5.50% | $2,269 | $257 | $3,086 |
| 2 | 5.50% | $2,269 | $257 | $3,086 |
| 3 | 6.50% | $2,526 | $0.00 | $0.00 |
Seller’s buydown total cost: $6,172
2-1 buydown
With this structure, the buyer’s rate is reduced by 2% in year one and 1% in year two before adjusting to the full rate in year three and beyond. This is a popular choice in resale transactions because it offers noticeable savings upfront, often enough to sway cost-sensitive buyers without significantly cutting into your proceeds.
| Year | Rate | Monthly payment | Monthly savings | Annual savings |
| 1 | 4.50% | $2,025 | $502 | $6,024 |
| 2 | 5.50% | $2,269 | $257 | $3,084 |
| 3 | 6.50% | $2,526 | $0.00 | $0.00 |
Seller’s buydown total cost: $9,108
3-2-1 buydown
This option lowers the buyer’s interest rate by 3% in the first year, 2% in the second year, and 1% in the third year before settling at the permanent rate in year four. It offers the most substantial initial savings, but also requires the largest seller concession. For that reason, it’s more commonly seen in new construction or higher-priced homes with more room to negotiate.
| Year | Rate | Monthly payment | Monthly savings | Annual savings |
| 1 | 3.50% | $1,794 | $732 | $8,784 |
| 2 | 4.50% | $2,025 | $502 | $6,024 |
| 3 | 5.50% | $2,269 | $257 | $3,084 |
| 4 | 6.50% | $2,526 | $0.00 | $0.00 |
Seller’s buydown total cost: $17,892
