top of page

How a 2/1 Seller-Paid Rate Buydown Can Help Realtors Sell More Homes

Updated: Jul 7

Agents must start getting creative with financing offers for their listings in order sell them quicker due to higher mortgage rates.
Agents must start getting creative with financing offers for their listings in order sell them quicker due to higher mortgage rates.

In Today’s Market, Creative Financing Moves Homes

With higher mortgage rates and affordability concerns, many buyers are hesitant or struggling to qualify. Sellers, on the other hand, don’t always want to lower their price. A 2/1 buydown bridges the gap—offering a meaningful financial incentive to buyers without sacrificing the seller’s bottom line. It's one of the smartest tools available to realtors right now to help listings stand out and close faster.


What’s a 2/1 Rate Buydown?

A 2/1 buydown is a temporary interest rate reduction on a buyer’s mortgage. It allows buyers to pay 2% less on their interest rate in year one, and 1% less in year two, before it resets to the full rate in year three. But here’s the key: The seller pays for it as a closing cost incentive.


This gives real estate agents a smart way to:

  • Help buyers qualify more easily

  • Create urgency for listings

  • Offer value without cutting the sales price


Quick Example

Let’s say your buyer locks in a 6.5% rate:

Year

Buyer’s Interest Rate

Year 1

4.5% (6.5% - 2%)

Year 2

5.5% (6.5% - 1%)

Year 3+

6.5% (Full note rate)

This structure can save buyers hundreds of dollars each month in the first two years—without lowering the sale price of the home.


Why It Works in Today’s Market

With higher rates and affordability challenges, a 2/1 buydown offers a way to:

  • Keep the home price intact while still offering a strong buyer incentive

  • Help buyers reduce their initial monthly payment and ease into homeownership

  • Structure deals with seller-paid concessions instead of price reductions


How to Use a 2/1 Buydown as a Sales Tool

  • Add it to listing marketing: Promote the buydown in property descriptions and digital ads

  • Mention it at showings and open houses: Buyers may not know this option exists

  • Leverage it in negotiations: When buyers want a lower price, offer a buydown instead


Price Reduction vs 2/1 Buydown

Let's compare how a price reduction compares to a 2/1 buydown as it relates to the buyers monthly cost. For each scenario, let's assume the seller of $500,000 home was to give a $10,000 seller concession that could be used to either lower the price or towards the buyers rate buydown.


Option A shows the buyer's payment if the price is reduced by to $490,000 and Option B shows what the payment would be with a 2/1 seller paid rate buydown.


Scenario

Option A

No Buydown

Option B

2/1 buydown Paid by Seller

Sales Price

$490,000

$500,000

Loan Amount (80%)

$392,000

$400,000

Interest Rate (Fixed 30-Year)

6.5% for full term

4.5% Year 1 5.5% Year 2 6.5% Year 3+

Monthly Payment - Year 1

$2,481

$2,027

Monthly Payment - Year 2

$2,481

$2,271

Monthly Payment - Year 3+

$2,481

$2,528

Total Monthly Savings Year 1

$454/month

Total Monthly Savings Year 2

$210/month

Total Savings Over First 2 Years

$7,968

Seller Concession Needed for Buydown

$0

~$10,000 (covers interest subsidy)


From a pure dollar savings standpoint, Option A is better for the buyer but Option B provides the buyer ~$8,000 of interest savings in the first 2 years. For buyers that are moving up in house or are expecting income increases in the first 2 years, Option B might be a solution that helps them buy the home they want or need.


How It Works Behind the Scenes

  • The seller pays the cost of the buydown at closing (usually 2–2.5% of the loan amount)

  • The lender places the funds in a temporary escrow account

  • That account covers the difference between the note rate and the reduced monthly payments during years 1 and 2

  • This is not an ARM; the rate simply steps up to the full note rate in year 3


Important: Always verify with the buyer’s lender that they support temporary buydown structures and know how to handle the setup properly.


Bottom Line for Realtors

In a competitive market with rising rates, a 2/1 seller-paid buydown can be a powerful tool to:

  • Keep deals moving

  • Help buyers qualify and feel comfortable

  • Position your listings as high-value without reducing the asking price


Need help structuring a 2/1 buydown or creating marketing materials for your next listing?

ree



Comentarios


When you are ready,
we are here. 

Ready to get started? Great, click below. If you have questions, call us! Our hours are listed below.

901-504-4663

 

Monday - Thursday                         8am-8pm

Friday                                                    8am-6pm

Saturday                                              9am-4pm

Sunday                                               12pm-4pm

Travis Chapman_edited.jpg

Travis Chapman

CEO

NMLS 64848

Cell: 901-289-8783

tchapman@localmortgage.com

Derek_Chapman_3_edited_edited.jpg

Derek Chapman

Vice President

NMLS 1339905

Cell: 901-701-6732

dchapman@localmortgage.com

Chase Newell (2)-min_edited.jpg

Chase Newell

Vice President

NMLS 1290069

Cell: 901-356-0568

cnewell@localmortgage.com

bottom of page