Rate Buydown vs. Price Cut: Same Money, Triple the Effect

Mortgage rates jumped again yesterday. The 30-year fixed averaged 7.28%, up from 7.03% the week before and 6.34% a year ago. If you’re preparing to list, the instinct is to reach for a price cut. There’s a better tool, and a seller-paid rate buydown usually moves a buyer about three times further for the same money.

Here’s the arithmetic, and the honest version of when it doesn’t apply.

What the rate move actually did to your buyer

Take a $700,000 house with 20% down. That’s a $560,000 loan.

At 6.34% last October, principal and interest ran about $3,481 a month. At 7.28% today, the same loan costs about $3,832.

That’s $351 more per month for the identical house. Nothing about your home changed. Your buyer pool just got smaller, and the people still in it got more payment-sensitive.

Why a rate buydown beats a price cut on the same dollars

Say you’re willing to give up $15,000 to get the deal done. You have two ways to spend it.

Option one: cut the price $15,000. The house goes to $685,000. With 20% down, the buyer’s loan drops by $12,000, not $15,000, because a fifth of your concession went to shrinking their down payment. Their payment falls to about $3,749.

You just bought them $82 a month.

Option two: pay $15,000 toward discount points. On a $560,000 loan that’s about 2.7 points. At the usual rule of thumb of a quarter point of rate per point paid, that takes them from 7.28% to roughly 6.61%. Their payment falls to about $3,580.

You just bought them $251 a month.

Same $15,000 out of your proceeds. Three times the effect on the number your buyer actually cares about.

The reason is structural. A price cut only attacks the slice of the loan equal to the cut. A rate buydown attacks the interest rate on the entire balance, every month, for thirty years. Over the first five years alone, that buyer saves about $15,076. They recover your entire concession, and then it keeps paying.

The part that matters more than the math

A price cut is public and permanent. It shows in the listing history, it tells every subsequent buyer that you blinked, and it becomes the comp your neighbor gets measured against next spring.

A concession is a line on the closing statement. Your sale price holds.

That distinction carries extra weight around here, because price cutting is far less routine in this region than the national coverage suggests. I’ve written before about how much less often Northeast sellers reduce compared with the rest of the country. When cuts are uncommon, the ones that happen stand out more.

Almost nobody around here is doing this

Nationally, 46.2% of sellers gave a concession of some kind this past spring, the highest May share Redfin has recorded. Nashville ran 75.5%. Charlotte 71.4%. Atlanta 68.7%.

The New York metro area, which covers Monmouth, Ocean, and Middlesex counties, came in at 2.9%. The lowest in the country.

Read that two ways. First, the national advice that you’ll have to hand something over does not describe this market. Most sellers here still don’t.

Second, and more useful: if you do hit a buyer who loves the house but can’t make the payment work, almost none of your competition is offering this. A rate buydown is an unusual move in Central Jersey, which is exactly what makes it effective.

When the price cut is genuinely the better call

I’d rather give you the limits than oversell the tool.

If rates fall and your buyer refinances, the buydown money is gone. This is the real risk, and it isn’t small. Points bought at 7.28% stop mattering the day someone refinances at 6%. A price cut is permanent. If you think rates drop meaningfully within two or three years, the cut is the more durable gift.

The house still has to appraise. A buydown keeps your contract price where it is, which means the appraisal has to support that number. A price cut lowers the bar. If you’re already nervous about the appraisal, cutting solves a problem the concession doesn’t.

Your listing has to get the showing first. Concessions are negotiated with a buyer who already walked through. If your traffic is thin because the price filters you out of searches, no concession fixes that. Pricing gets you seen. Buydowns close.

Point pricing isn’t fixed. A quarter point of rate per point paid is a convention, not a guarantee. It moves with the market and varies by lender, so the actual quote should come from the buyer’s loan officer before anyone agrees to a number.

The caps on a seller-paid rate buydown

You can’t contribute unlimited amounts. The limits run by loan type and down payment:

• Conventional: 3% with less than 10% down, 6% with 10% to 25% down, 9% above 25% down
• FHA: 6% of the sale price
• VA: 4% for true concessions
• USDA: 6% of the sale price

On that $700,000 example with a conventional buyer putting 20% down, the ceiling is $42,000. The $15,000 above sits comfortably inside it.

One trap worth naming: a buyer putting 5% down is capped at 3%, which may be less room than they need. Find out which loan your buyer is using before you structure anything.

If you’re selling in order to buy, this runs both directions

Most sellers here are also buyers, and that’s where higher rates do their real damage.

Roughly three-quarters of homeowners hold a mortgage under 6%. Around a third of them say they wouldn’t trade it for any reason. If you’re giving up a 3.5% loan to take on a 7.28% one, the rate swap costs you more than the commission does.

Which means the tool works in reverse. Ask for a buydown on your purchase. Most sellers around here have never been asked, and a concession you receive is worth the same as one you give. It’s also worth knowing how far your own quote may sit from the advertised rate before you assume 7.28% is your number.

The useful way to think about a rate buydown

You have a number you’re willing to come down to. That part isn’t really negotiable in your own head, and it shouldn’t be.

The question is what form it takes on the way out. Spent as a price cut, it moves your buyer’s payment a little and your comp a lot. Spent as a rate buydown, it moves their payment substantially and leaves your sale price intact.

Most sellers never consider the second option, because nobody puts it in front of them. Ask your agent to run both versions on your actual number before you agree to drop the price.

---

Rate figures reflect Freddie Mac’s Primary Mortgage Market Survey as of October 1, 2026. Payment figures are principal and interest only and exclude taxes, insurance, and any mortgage insurance. Point pricing and the rate reduction per point vary by lender and change daily. Concession limits reflect current agency guidelines and can change. I’m a real estate agent rather than a lender; confirm any buydown structure with the buyer’s loan officer before it goes in a contract.