7% Interest? How Smart Buyers Are Getting 4%

Why This is Gaining Traction

High mortgage rates have slowed some buyers down and stretched negotiations longer for sellers.

But there’s a middle ground solution starting to pop up more often in our local contracts: the seller funded rate buydown.

It’s not a giveaway.

It’s a trade and when done right, both buyer and seller walk away better off than they would in a price cut only deal.

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What is it?

A seller funded rate buydown is when the seller gives the buyer a closing concession to prepay the interest needed to temporarily lower the buyer’s mortgage rate for the first 1–3 years of the loan.

This makes the home more affordable for the buyer right away and lets the seller keep the sale price stronger than if they had offered a large price reduction.

How a Seller Funded Rate Buydown Works

Instead of lowering the asking price, the seller gives a concession at closing to cover the cost of temporarily reducing the buyer’s interest rate.

The most common format is the 2-1 buydown:

• Year 1: Rate is 2% lower than the locked rate.

• Year 2: Rate is 1% lower.

• Year 3+: Rate returns to the original locked rate.

• Loan (10% down): $516,600

• Locked rate: 6.75% → $3,355/month (P&I)

With a 2-1 Buydown:

• Year 1: 4.75% → $2,694/month ($661/month savings)

• Year 2: 5.75% → $3,012/month ($343/month savings)

• Year 3+: 6.75% → $3,355/month

Total buyer savings over first two years is $12,050, fully funded by the seller at closing.

Why Buyers Like It

• Immediate Payment Relief – Lower monthly cost during the first years of ownership, when budgets can feel the tightest.

• More Buying Power Now – Makes higher priced homes attainable without waiting for rates to drop.

• Flexibility to Refinance – If rates improve, they can refi before the buy-down period ends.

Why Sellers Like It

• Keep More of Your Asking Price – Keeps the sale price closer to list instead of slashing $40K–$50K for the same effect on payment.

• Trade Terms for Dollars – A smaller concession on terms often has a bigger impact than a bigger price cut.

• Buyers Pay for Flexibility – Just like in creative financing, buyers will pay more for a home if the terms help them manage short term affordability.

• Create a Smoother Path to Closing – Offering this option up front can reduce back and forth and make it easier for both sides to agree on a deal.

Why It’s Win–Win

The buyer gets into the home they want with a payment they can manage.

The seller moves their property without giving up as much in price and often closes faster.

It’s not about one side “winning” over the other; it’s about structuring the deal so both parties walk away satisfied.

Final Thought

In today’s market, creative deal structures like the seller funded buydown aren’t about one side “winning” over the other.

They’re about finding the middle ground.

Buyers get a manageable payment.

Sellers keep more of their asking price.

And both get to the closing table faster.

If you see a property that’s been sitting a while, it’s worth asking: Could a buydown get us both what we want?

This isn’t for everyone, but if you want to see exactly how buyers are getting rates in the 4s, even now, here’s what to do.

Reply with “4%” and I’ll send you the details.

Stay Safe,

Mike