Over the last couple of years, more of my buyers have been offered a rate buydown by sellers or builders. It sounds great — but is it better than a lower price? Let me show you with real numbers.

What a 2-1 buydown is

Someone (usually the seller) prepays interest so your rate is 2% lower in year one, 1% lower in year two, then the full note rate from year three on. Your loan and your qualifying rate do not change; the lender simply draws from an escrow account to cover the difference.

Example on a $1.2M loan at 6.5%

• Year 1 at 4.5%: about $6,080/month principal & interest
• Year 2 at 5.5%: about $6,810/month
• Year 3+ at 6.5%: about $7,585/month

The seller's cost to fund that: roughly $27,000 (the sum of the monthly differences). That money sits in escrow and is applied to your payments.

Buydown vs. price reduction

If instead the seller cut the price by $27,000, your loan drops to $1,173,000 and your payment falls by only about $170/month — forever. The buydown gives you much more relief in years one and two, then nothing. So:

• Choose the buydown if cash flow is tight now, you expect income to rise, or you plan to refinance when rates drop.
• Choose the price cut if you plan to stay long-term with the same loan, or if a lower price helps you with property taxes (assessed value follows purchase price in California).
• Often the best answer is both: a modest credit toward a buydown and a modest price adjustment. That is a negotiation, and it is my job.

Questions to ask before you accept one

1. Is the buydown funded by the seller, or is the lender charging me points for it?
2. If I refinance early, is the unused escrow applied to my principal? (It usually is — confirm in writing.)
3. Can I qualify at the full note rate? You must.

Run your own scenarios with my mortgage calculator, then send me the listing and I will tell you which way to negotiate.

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Tóm tắt tiếng Việt

2-1 buydown là người bán trả trước tiền lãi để lãi suất của mình thấp hơn 2% năm đầu, 1% năm thứ hai, từ năm thứ ba trở về mức bình thường.

Ví dụ loan $1.2 triệu ở 6.5%: năm 1 trả khoảng $6,080/tháng, năm 2 khoảng $6,810, từ năm 3 khoảng $7,585. Người bán tốn khoảng $27,000.

• Nếu thay vào đó giảm giá $27,000, mỗi tháng chỉ bớt khoảng $170 nhưng bớt mãi mãi.
• Chọn buydown nếu cần nhẹ gánh 2 năm đầu hoặc dự tính refinance.
• Chọn giảm giá nếu ở lâu dài (thuế nhà cũng thấp hơn).

Nhiều khi tốt nhất là xin cả hai — đó là việc của Ken khi thương lượng. Gửi listing cho Ken.