Homebuyers

Price Cut or Mortgage Rate Buydown: Which Saves Homebuyers More Money?

A seller offers to knock $15,000 off the price of a home. Sounds like a good deal. But what if putting that same money toward a lower mortgage rate could save the homebuyer even more?

With more homes for sale and sellers continuing to reduce prices, homebuyers have opportunities to negotiate savings beyond the asking price.

Price reductions on the rise. According to Realtor.com’s October 2026 housing report, 20.5% of homes for sale had a price reduction, the highest October share since 2022. Active listings climbed 7.4% from a year earlier to nearly 1.2 million homes.

“The market is cooling on both sides, but in different ways,” said Danielle Hale, chief economist at Realtor.com. “Buyers are stepping back as higher mortgage rates cut into their buying power, while sellers are listing less often without a broad increase in delistings or price cuts.”

A lower purchase price, help with closing costs, or a mortgage rate buydown can all save you money. Here’s how they compare.

Option 1: Take the $15,000 price cut

Consider a $400,000 home. The seller agrees to reduce the price by $15,000, bringing it to $385,000.

With 20% down and a 30-year fixed-rate mortgage at 7.25%, the original monthly principal and interest payment would be approximately $2,183.

At the reduced price, the payment falls to about $2,101.

That’s $82 in monthly savings, or $984 annually. The homebuyer would also need $3,000 less for the down payment.

Over 30 years, the smaller mortgage would reduce total principal and interest payments by approximately $29,500, assuming the loan isn’t refinanced or paid off early.

Option 2: Ask for $15,000 toward closing costs

Instead of lowering the price, the seller could contribute $15,000 toward eligible closing costs.

The purchase price and monthly mortgage payment remain unchanged, but the contribution could significantly reduce the cash needed at closing.

That may appeal to homebuyers who want to preserve savings for moving expenses, improvements, or emergencies.

However, seller concessions are subject to loan program limits and generally cannot exceed eligible expenses. A homebuyer with only $10,000 in eligible costs may not be able to use the full $15,000 credit.

Seller credits also cannot replace the required down payment.

Option 3: Use the credit for a permanent mortgage rate buydown

A permanent rate buydown uses upfront discount points to secure a lower interest rate for the life of the loan.

On the same $400,000 home with a $320,000 mortgage, suppose $6,400 in discount points reduces the rate from 7.25% to 6.625%.

The monthly principal and interest payment would fall from approximately $2,183 to $2,049.

That’s $134 in monthly savings, or $1,608 annually, compared with $82 from the price reduction.

Over 30 years, the lower rate would reduce scheduled principal and interest payments by approximately $48,000, before accounting for the buydown’s upfront cost.

If the seller contributes $15,000, the remaining $8,600 could cover other eligible closing costs.

Actual discount-point pricing varies by lender, market conditions, and borrower qualifications.

What about a temporary 2-1 mortgage-rate buydown?

A temporary buydown reduces mortgage payments during the first years of homeownership.

With a 2-1 buydown and a 7.25% note rate, payments are calculated at 5.25% in the first year and 6.25% in the second. The full 7.25% payment begins in year three.

This can provide breathing room for moving costs, furnishings, and repairs.

However, the savings expire, and homebuyers must generally qualify based on the full mortgage payment. Seller-funded subsidies must also meet loan-program requirements.

Which saves more: A price cut or mortgage rate buydown?

For a $400,000 home with 20% down, a $15,000 price reduction saves approximately $82 monthly and $3,000 upfront. A $15,000 closing cost credit can reduce eligible upfront expenses, while a $6,400 permanent buydown could save $134 monthly.

One mortgage professional recommends combining a permanent buydown with help covering closing costs.

“I’d lean toward the seller credit here because it can help the buyer in two ways,” said Stephen Moye, a Sales Manager at New American Funding in San Diego, Calif. “A $15,000 price reduction saves about $82 a month. Using $6,400 of that credit to buy the rate down from 7.25% to 6.625% saves about $134 a month and leaves $8,600 to help cover other closing costs.”

The strategy can lower monthly payments while preserving cash, provided the loan permits the contribution and there are enough eligible expenses.

Homebuyers should also consider whether they expect to refinance or sell before realizing the long-term benefits of a lower rate.

“I wouldn’t spend the entire credit on the rate because there’s a point where the extra savings just aren’t worth the cost,” said Moye. “And with the seller paying the points, there’s less concern about refinancing before recovering money you spent out of pocket.”

When comparing seller concessions, the best choice depends on available cash, monthly budget, and how long the homebuyer expects to keep the mortgage.

*Examples assume a 30-year conventional fixed-rate mortgage with 20% down on a $400,000 home, unless otherwise noted. Payments reflect principal and interest only. Discount-point pricing is illustrative and must be confirmed.

Stephen Moye NMLS #268619