Seller-Paid Mortgage Rate Buydown: How It Works vs a Price Cut

Are sellers really paying to lower your mortgage rate?

Yes, and it is a growing tactic. Creator Michael Bordenaro Clips argues in a video published October 31, 2026, that sellers are increasingly offering to fund a mortgage rate buydown rather than trim the asking price, a move similar to what many builders already do. He says about 45% of sellers are now giving some kind of concession, and that rate buydowns rank among the most popular.

A seller-paid buydown means the seller covers a lump sum at closing that lowers the buyer's interest rate, either for a few years or for the life of the loan. For buyers focused on the monthly bill, that can look better than a price cut. For sellers, it can protect the headline sale price. Whether it is a good deal depends on the numbers, your loan type and how long you keep the loan.

How a seller-paid rate buydown works

A buydown is prepaid interest. Someone, in this case the seller, pays the lender up front, and the lender gives the borrower a lower rate in return. There are two common forms.

• Permanent buydown. The money buys discount points. One point equals 1% of the loan amount, so on a $320,000 loan, one point is $3,200. The lower rate lasts for the whole loan, unless you sell or refinance.
• Temporary buydown. The rate is reduced for the first one to three years, then steps up to the note rate. A "2-1" buydown, for example, lowers the rate 2 points in year one and 1 point in year two. The payment then rises to the full amount.

How much rate reduction a point buys changes with lender pricing and market conditions, so it is not a fixed formula. The Consumer Financial Protection Bureau explains discount points and lender credits in plain language, and it is worth reading before you negotiate.

Limits on what sellers can pay

Loan programs cap how much a seller can contribute toward a buyer's costs. For conventional loans backed by Fannie Mae, the cap generally runs from 3% to 9% of the price depending on the down payment. FHA and VA loans have their own limits. These are general guidelines and they change, so ask your lender for the exact ceiling on your loan. On a $400,000 home with 20% down, a 6% cap would allow roughly $24,000 in seller credits, which may or may not be enough for the buydown you want.

The math on a $400,000 home

The video uses the median-priced home of $400,000 with 20% down, a loan of $320,000. Michael Bordenaro Clips assumes a 7.5% rate as roughly the best a conventional borrower could get, versus 6% if the seller buys the rate down. Those are his assumptions, not current market quotes. Check Freddie Mac's weekly survey for where average rates actually sit.

The buydown saves about $319 a month compared with no concession. That is roughly $3,800 a year, or more than $114,000 over 30 years if the borrower keeps the loan to the end. (The video misspeaks and calls the $3,800 a monthly figure. It is annual.)

The price-cut scenario leaves the buyer paying about $39 more a month than the buydown scenario. It also lowers the required down payment by $10,000 at the same 20%, which matters to buyers who are cash-constrained. These figures cover principal and interest only. Property taxes, insurance and any HOA dues come on top.

Buydown vs price cut: which is better?

Bordenaro says he has long advised buyers to take the price cut, because the purchase price is permanent while rates move and a refinance may become possible. He notes that many buyers and sellers are now choosing the opposite. His explanation is that a buydown lowers the payment more per dollar the seller spends, and can cost the seller less than a large price reduction.

Here is a fair summary of the tradeoffs.

Where a buydown tends to help

• Monthly cash flow improves more, which can help a buyer qualify under debt-to-income limits.
• The recorded sale price stays higher, which can support neighbors' comparable sales and the seller's pride.
• Temporary buydowns give breathing room if you expect income to rise.

Where a price cut tends to help

• A lower price reduces the loan, the down payment needed and typically the property tax assessment.
• It keeps its value no matter what rates do. A buydown's benefit can disappear if you refinance or sell within a few years.
• It avoids the risk that the appraisal or loan program limits restrict credits.

The creator's own caution is worth repeating: a buydown is "taking a gamble" that rates stay put. If rates drop meaningfully and you refinance, the money the seller spent on your behalf has done its job only for the time you held the loan. He argues nothing on the horizon points to a fast decline, given high inflation and what investors demand from Treasury yields. That is his view, not a forecast, and rate paths are hard to call. Our look at inflation and mortgage rates explains how those forces feed through.

Why some sellers pull listings instead

Not every seller is willing to fund concessions. Bordenaro cites two figures from September: 6.1% of sellers removed their homes from the market after failing to get an acceptable offer, and 18% of homes were pulled in Chicago, which he calls one of the strongest markets in the country. He does not name the source of the data, so treat the numbers as unverified until you can match them to a dataset such as Redfin's.

His warning to sellers is that delisting does not guarantee a better outcome. Owners who waited through the past couple of years, he says, are relisting at lower prices and facing more competition each year. He thinks waiting works mainly for owners with long tenure and big equity, who can absorb a lower price. Recent buyers, who may have little equity, have less room. For more on that dynamic, see our analysis of why home prices haven't dropped and how sellers now outnumber buyers.

Limits and counterpoints to the video

The creator's math is clean, but a few caveats apply.

First, the $400,000 example compares a deep 1.5-point rate cut to a $50,000 price cut. Whether a seller can buy down that far for less than $50,000 depends on lender pricing and on the contribution cap for your loan. A shallower buydown would save less per month.

Second, the comparison is sensitive to the rate assumption. At 7.5% the buydown looks powerful; if actual rates are lower, the payment gap between options narrows.

Third, a price cut brings benefits the video mentions only briefly. Lower taxes, a smaller loan and more equity from day one can matter if you plan to stay a decade or more.

Fourth, the 45% concession figure and September delisting rates come without a named source, so they are the creator's claims rather than verified data. His broader view that the market is "returning to normal" is an opinion; others read the same data as a sign of stress in the market. The honest answer is that conditions differ sharply by metro area.

What this means for you

If you are buying

• Ask the seller's agent what concessions are on the table, then ask your lender to price both a buydown and a price-reduction scenario side by side.
• Compare the total cash needed at closing, not just the monthly payment.
• Estimate how long you will hold the loan. If you expect to sell or refinance within two to three years, a permanent buydown may not pay back.
• Our guide on how to buy a home today covers closing costs and negotiation steps.

If you are selling

• Calculate what each option actually costs you at closing. A concession comes out of your net proceeds just as a price cut does.
• Confirm your buyer's loan program allows the credit you are offering.
• Compare your offer with local competition, including builder incentives, which we cover in new home sales and price cuts.

If you already own

• A buydown struck in your market affects your neighbors' sale prices less than a price cut would, but a flood of listings still shapes comparable sales.
• If you are thinking of waiting, weigh the carrying costs of taxes, insurance, maintenance and HOA fees against the odds of a better price next year.

None of this is personalized financial advice. A loan officer, and for sellers a local agent, can run the real numbers.

What to watch next

Three things will tell you whether buydowns stay popular. The first is weekly mortgage rates: Freddie Mac's survey and the FRED series track them. If rates fall, buyers will resist paying for buydowns. The second is the share of listings with price cuts and concessions in Redfin and Realtor.com reports. The third is the share of listings pulled or relisted, which shows how stubborn sellers are. If more owners give up waiting, expect larger concessions in the months ahead.

For now, the takeaway is practical. A seller-paid buydown is a legitimate tool that can lower your payment noticeably, but only a side-by-side comparison with a price cut, built on your own loan quote, shows which one wins for you.