A rate buydown is when money is paid upfront—by the buyer, seller, or builder—to temporarily or permanently lower the mortgage interest rate, reducing the borrower’s monthly payment. Common forms include temporary buydowns (like 2-1 or 3-2-1, where the rate is lower in the first years) and permanent buydowns, where points are paid to lower the rate for the life of the loan.

Seller-paid rate buydowns are a common incentive.

Here are the key pros, cons, and examples:

Pros for the Seller

Expands buyer pool: Lower initial payments help buyers qualify who might otherwise be priced out.
Faster sale: Attractive in high-rate markets when buyers are payment-sensitive.
Preserves list price: Keeps the headline price higher than offering a price reduction (useful for appraisals and neighborhood comps).
Targeted incentive: Helps most during the buyer’s early ownership years, when affordability matters most.

Cons for the Seller

Upfront cost: Seller pays cash at closing for the buydown.
Less visible than price cuts: Some buyers don’t fully understand buydowns and may undervalue the benefit.
No long-term control: If the buyer refinances early, the seller-paid benefit may be short-lived.
Concession limits: Seller credits are capped by loan program (FHA, VA, conventional).

Bottom line: Seller-offered buydowns are most effective when buyers care more about monthly payment than purchase price and when interest rates are elevated.

Examples

2-1 Temporary Buydown:
On a $400,000 home, the seller pays ~$8,000 to reduce the buyer’s rate by 2% in year one and 1% in year two. The buyer gets significantly lower payments upfront; the rate returns to note rate in year three.
Permanent Buydown (Points):
Seller pays $10,000 in points to lower the buyer’s rate by ~0.50% for the life of the loan, reducing monthly payments permanently.
Buydown vs. Price Cut:
Instead of cutting the price by $20,000, the seller uses $10,000 for a buydown—often creating a larger monthly payment reduction while keeping the sale price higher.

For your specifics, here is a Buydown Calculator.

Here are permanent buydown examples, now assuming 10% down on a $300,000 purchase price at a 6.50% base rate.
(30-year fixed, P&I only, rounded.)

Base Scenario (No Buydown)

Purchase price: $300,000
Down payment (10%): $30,000
Loan amount: $270,000
Interest rate: 6.50%
Monthly P&I: ≈ $1,707

Example 1: 0.25% Permanent Buydown

New rate: 6.25%
Typical cost: ~1 point = $2,700 (seller-paid)
Monthly P&I: ≈ $1,663
Monthly savings: ≈ $44
Annual savings: ≈ $528

Example 2: 0.50% Permanent Buydown

New rate: 6.00%
Typical cost: ~2 points = $5,400
Monthly P&I: ≈ $1,619
Monthly savings: ≈ $88
Annual savings: ≈ $1,056

Example 3: 1.00% Permanent Buydown

New rate: 5.50%
Typical cost: ~4 points = $10,800
Monthly P&I: ≈ $1,532
Monthly savings: ≈ $175
Annual savings: ≈ $2,100

Buydown vs. Price Cut (Quick Comparison)

$10,000 price reduction → loan drops slightly → ~$55–$60/month savings
$10,800 permanent buydown → ~$175/month savings

Bottom Line

With lower down payments, buyers are even more payment-sensitive, which makes seller-paid permanent buydowns especially powerful—often delivering 2–3× the monthly impact of a similar price cut.