When a listing sits, the usual move is a price cut. On a Brooklyn home at $900,000, a $15,000 reduction lowers the buyer's monthly payment by less than $100. Buyers barely notice.
What a 2-1 buydown does
The same money can instead fund a 2-1 buydown. The buyer's rate is 2% lower in year one and 1% lower in year two, then returns to the note rate. On a $720,000 loan at a 6.5% note rate, that lowers the principal and interest payment by about $900 a month in the first year and about $460 in the second.
Why buyers respond
Buyers shop by monthly payment. A buydown advertises a number they can feel, and it gives them two years of breathing room while they settle in or wait to see if rates fall.
The rules
- The buyer still qualifies at the full note rate.
- The cost is paid at closing as a seller concession.
- Conventional concession limits on a primary residence: 3% with under 10% down, 6% with 10-25% down, 9% with more than 25% down. FHA allows up to 6%.
If you are a listing agent with a stale listing, send us the address and price. We will model a buydown against a price cut so you can show your seller the numbers.