How a 2/1 Seller-Paid Rate Buydown Can Help Realtors Sell More Homes
- Travis Chapman
- Apr 17
- 3 min read
Updated: Jul 7

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?

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