Michael Thayer

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Understanding Mortgage Rate Buydowns

Understand how mortgage rate buydowns work and create affordability

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See The Numbers Yourself

Here's the home

The price, your down payment, and your payment at today's rate.

Home Price
Your Down Payment
Today's Rate
Your Monthly Payment
Loan details
Down payment
Loan amount
Term 30-year fixed
Payment shown Principal and interest
A lower rate lowers your payment

A buydown lowers your rate for the life of the loan.

Today's Rate
Your New Rate
Your New Monthly Payment
Your Monthly Savings
Savings details
Yearly savings
Interest saved over the loan
Buydown type Permanent, 30-year fixed
What does it cost you?

The seller can cover the cost with a Buydown Cost (Seller Credit).

Buydown Cost
Seller Pays
You Pay
Same home, more room in your budget

Your buydown frees up money every month for the things that matter to you.

Your payment goes down
Monthly payment today
With the buydown
per month
or
per year
Put your savings wherever life needs it
Groceries
Loans
Gas
Childcare
Savings
Quality of life
Summary details
Today With the Buydown
Interest rate
Monthly payment
Buydown cost
Seller pays
You pay

This walkthrough is for example purposes only and is not an offer to lend. Example payments shown here include principal and interest on a 30-year fixed loan, and don't include taxes, insurance, or mortgage insurance. Actual rates, payments, and costs vary by lender and buyer.

How Seller Concessions Can Create Affordability in Today's Market

Use Seller Concessions to Create Affordability

Seller concessions are money a seller, or another interested party to the sale such as a builder or agent, agrees to put toward the buyer’s costs.

Lenders call these “interested party contributions.”

➡️ More Than Help With Closing Costs

Seller concessions most often cover closing costs. But in a high-rate market, using them to lower the buyer’s interest rate can create more value.

A concession applied to a permanent rate buydown lowers the buyer’s rate for as long as they keep the loan. That can mean:

  1. A lower monthly payment
  2. More buying power

Using concessions toward closing costs instead can mean less cash needed at closing.

➡️ A Quick Example

On an $800,000 home with 20% down:

  1. Seller Concession: $33,000
  2. Original Interest Rate: 7.625%
  3. Rate After the Permanent Buydown: 6.375%

The $33,000 concession is within the 6% limit for this loan type.

➡️ Why the Offer Structure Matters

A good mortgage advisor looks at concessions as a financing tool, not just a closing-cost credit.

By structuring them into the offer, the advisor helps sellers keep their price and helps buyers afford the home.

Mortgage Rate Buydowns: FAQ

Seller Concession FAQs

➡️ What is a seller concession?

  1. It’s money the seller or another interested party contributes toward the buyer’s closing costs.

➡️ What can concessions pay for?

  1. Closing costs, prepaid items like taxes and insurance, and rate buydowns. They generally can’t be used for the down payment or given to the buyer as cash back.

➡️ Are there limits?

  1. Yes. Limits depend on the loan type, down payment, and whether the home will be a primary residence, second home, or investment property.
  2. For conventional loans on a primary home, the limit is generally:
  3. Less than 10% down: 3%
  4. 10% to 25% down: 6%
  5. More than 25% down: 9%
  6. FHA and VA loans have their own rules.

➡️ Why use concessions for a rate buydown instead of closing costs?

  1. A closing-cost credit helps once by reducing the money you need at closing. A permanent buydown lowers your rate for as long as you keep the loan, which can make a bigger impact on your monthly payment and buying power.

➡️ How do I get concessions in my offer?

  1. Work with your agent and mortgage advisor to include them in the purchase contract, so the numbers are structured correctly from the start.

Limits and eligibility vary by loan program and are subject to change. Talk with a mortgage advisor about your specific situation.