Should I Offer a Rate Buydown to Sell My Las Vegas Home?

by Ryan Rose

Mortgage rates are hovering around 6-7%. Buyers are struggling with affordability. One strategy sellers are using to stand out: offering to buy down the buyer's interest rate. But is it worth it?

What Is a Rate Buydown?

A rate buydown is when the seller pays money upfront to reduce the buyer's mortgage interest rate. This lowers the buyer's monthly payment, making your home more affordable and attractive.

There are two main types:

Permanent Buydown

You pay "points" to permanently lower the buyer's rate for the life of the loan.

1 point = 1% of loan amount
1 point typically reduces rate by 0.25%

Example: On a $400,000 loan at 7%:

Seller pays 2 points ($8,000)
Rate drops from 7% to 6.5%
Buyer's payment drops from $2,661 to $2,528/month
Buyer saves $133/month for the life of the loan

Temporary Buydown (2-1 or 3-2-1)

You pay to reduce the rate for the first few years only, then it adjusts to the full rate.

2-1 Buydown:

Year 1: Rate reduced by 2%
Year 2: Rate reduced by 1%
Year 3+: Full rate applies

3-2-1 Buydown:

Year 1: Rate reduced by 3%
Year 2: Rate reduced by 2%
Year 3: Rate reduced by 1%
Year 4+: Full rate applies

Example: $400,000 loan at 7% with 2-1 buydown:

Year 1: 5% rate = $2,147/month
Year 2: 6% rate = $2,398/month
Year 3+: 7% rate = $2,661/month
Seller cost: approximately $10,000-12,000

Why Buydowns Work

Monthly payment matters more than price. Most buyers think in terms of what they can afford monthly, not total purchase price. Lowering their payment makes your home fit their budget.

Psychological appeal. A lower rate feels like a win, even if the economics are similar to a price reduction.

Qualifies more buyers. Lower payments mean lower debt-to-income ratios, helping marginal buyers qualify for your home.

Stands out from competition. When 7,000+ homes are listed, offering a buydown differentiates your property.

Buydown vs. Price Reduction

Should you reduce price or offer a buydown? Consider:

$10,000 Price Reduction	$10,000 Rate Buydown
Reduces loan amount by $10,000	Reduces rate, keeping loan higher
Saves buyer ~$60/month	Saves buyer ~$100-150/month (varies)
Permanent record of lower price	Sale price stays higher for comps
Affects appraisal	Doesn't affect appraisal

For buyers focused on monthly payment, buydowns often provide more perceived value per dollar spent.

When Buydowns Make Sense

Your home is sitting. If you've had showings but no offers, a buydown offer can reignite interest.

Buyers cite affordability. Feedback mentions payment concerns or rates being too high.

First-time buyer target market. These buyers are most rate-sensitive and payment-focused.

You want to maintain sale price. Buydowns keep your recorded sale price higher than an equivalent price reduction.

When to Skip Buydowns

Cash buyer market. If you're targeting investors or cash buyers, they don't need rate help.

Already priced aggressively. If you're the best value in your area, a buydown may not be necessary.

Home needs work. Fix condition issues before spending money on rate incentives.

Quick sale already expected. If you have strong interest, don't give away money unnecessarily.

How to Offer a Buydown

You can either:

Advertise upfront: "Seller offering 2-1 buydown" in your listing to attract rate-sensitive buyers.

Negotiate into offer: When a buyer makes an offer, counter with a buydown instead of (or in addition to) price reduction.

Respond to requests: Buyers may specifically request buydown assistance as part of their offer.

The Bottom Line

In today's high-rate environment, seller-paid rate buydowns can be powerful tools to attract buyers and close deals. They provide more payment relief per dollar than equivalent price reductions and can help your home stand out. Consider them if your home is sitting or if buyer feedback points to affordability concerns.

Wondering if a rate buydown would help sell your Las Vegas home? Let's discuss your marketing strategy.

Frequently Asked Questions About Rate Buydowns for Las Vegas Home Sellers

Q1: What is a rate buydown and how does it work?

A rate buydown is when a home seller pays money upfront to reduce the buyer's mortgage interest rate, making the monthly payment more affordable. The seller pays "points" (1 point = 1% of the loan amount) to the lender, which lowers the buyer's rate either permanently or temporarily for the first few years of the loan.

Q2: How much does a rate buydown typically cost?

The cost varies based on the loan amount and type of buydown. For a permanent buydown, 1 point typically costs 1% of the loan amount (e.g., $4,000 on a $400,000 loan) and reduces the rate by about 0.25%. For temporary buydowns like a 2-1 buydown, expect to pay approximately $10,000-$12,000 on a $400,000 loan.

Q3: What's the difference between a 2-1 and 3-2-1 buydown?

A 2-1 buydown reduces the interest rate by 2% in year one, 1% in year two, then returns to the full rate in year three. A 3-2-1 buydown reduces the rate by 3% in year one, 2% in year two, 1% in year three, then returns to the full rate in year four. Both are temporary buydowns that provide the most savings in the early years.

Q4: Is a rate buydown better than a price reduction?

It depends on your goals. A rate buydown typically provides more monthly payment relief per dollar spent compared to a price reduction, and it keeps your recorded sale price higher for comparable sales. However, a price reduction is simpler and provides permanent savings. Rate buydowns work best when targeting payment-focused buyers in high-rate environments.

Q5: Should I advertise a rate buydown in my listing or offer it during negotiations?

Both strategies work. Advertising a rate buydown upfront in your listing can attract more rate-sensitive buyers and generate initial interest. Alternatively, you can use it as a negotiation tool when countering offers. If your home is sitting without offers, advertising upfront is usually more effective.

Q6: Will offering a rate buydown help my Las Vegas home sell faster?

Yes, particularly in the current market where mortgage rates are between 6-7%. Rate buydowns make your home more affordable on a monthly payment basis, which is how most buyers evaluate affordability. This can help you stand out among the 7,000+ homes currently listed in Las Vegas and attract more qualified buyers.

Q7: Does a rate buydown affect the home appraisal?

No, a rate buydown does not affect the home appraisal. The appraiser values the property based on comparable sales and property condition, not financing terms. This is an advantage over price reductions, which directly lower the sale price and can affect future comparable sales in your neighborhood.

Q8: Who benefits most from a rate buydown - first-time buyers or experienced buyers?

First-time buyers typically benefit most from rate buydowns because they're usually more rate-sensitive and payment-focused. They often have tighter budgets and may struggle to qualify at higher rates. A lower monthly payment can make the difference between qualifying or not qualifying for your home.

Q9: When should I NOT offer a rate buydown?

Skip rate buydowns if you're targeting cash buyers or investors (who don't need financing), if your home is already priced aggressively and generating strong interest, if your home has condition issues that need addressing first, or if you're already expecting a quick sale. Focus your resources where they'll have the most impact.

Q10: Can I combine a rate buydown with other seller concessions?

Yes, you can combine a rate buydown with other seller concessions like covering closing costs or including a home warranty. However, be mindful of lender limits on total seller concessions, which typically range from 3-9% of the purchase price depending on the loan type and down payment amount.

Q11: How much does a 1% rate reduction save buyers monthly?

On a $400,000 loan, reducing the rate from 7% to 6% saves buyers approximately $263 per month. The exact savings depend on the loan amount and starting rate, but this significant monthly reduction can make your home affordable to buyers who otherwise couldn't qualify or who were shopping in a lower price range.

Q12: What happens if the buyer refinances after I've paid for a rate buydown?

With a permanent buydown, if the buyer refinances, they lose the reduced rate since it applies only to the original loan. With temporary buydowns, the reduced rate only lasts for the specified period anyway. This is a risk sellers take, but in today's market, buydowns help close the deal now, which is the primary goal.