Ed 
Ask for the price cut. On a $495,000 Travis County home with 20% down at a 7.28% rate, a $15,000 price cut leaves you $4,255 better off after five years than the same $15,000 spent on a seller-paid 2-1 rate buydown, and $8,217 better off after ten. And that’s the rate buydown vs price cut answer even after giving the buydown every break, because a 2-1 on that loan only costs $9,347, so I let the buyer keep the other $5,653 as a closing cost credit (it still loses). Sounds backwards right, the buydown payment looks so much better in year one. But a temporary buydown is spent in 24 months, and a price cut shrinks your loan for all 30 years.
Here are the inputs so you can check me. The 7.28% is the 30-year average from the Freddie Mac Primary Mortgage Market Survey for the week of October 1, 2026. The $495,000 is the August 2026 median sold price for Travis County from the MLS closed-sale data we track at Neuhaus Realty Group (August is the latest full month). And there’s one fact the buydown pitch tends to skip: on a conventional loan, Fannie Mae’s Selling Guide requires the lender to qualify you at the full note rate, not the bought-down rate. So a 2-1 doesn’t get you approved for a bigger house. It just makes the first two years cheaper.
I’ll be upfront. I’m not a big fan of rate buydowns, and before this post I had never actually sat down and run the numbers on them (the broker who goes on gut feel, I know). My gut said it’s not a dollar-for-dollar trade and the math is a little fuzzy. So we did the rate buydown vs price cut math. The temporary buydowns lost. One version of the permanent buydown won, and I’m going to show you that one too, because it wouldn’t be fair to only show you the half that agrees with me right.
Rate buydown vs price cut, the monthly payment
Here’s the same $15,000 of seller money spent five different ways on the same house.
| Option (same $15,000 of seller money) | Rate you pay | Year 1 | Year 2 | Year 3 | Year 4+ | Cash you bring to closing |
|---|---|---|---|---|---|---|
| No concession ($495,000) | 7.28% | $2,709 | $2,709 | $2,709 | $2,709 | $99,000 |
| $15,000 price cut ($480,000) | 7.28% | $2,627 | $2,627 | $2,627 | $2,627 | $96,000 |
| 2-1 buydown ($9,347) + $5,653 closing credit | 5.28% / 6.28% / 7.28% | $2,194 | $2,446 | $2,709 | $2,709 | $93,347 |
| Permanent points, if 1 point = 0.25% (assumption) | 6.33% | $2,460 | $2,460 | $2,460 | $2,460 | $99,000 |
| Permanent points, if 1 point = 0.125% (assumption) | 6.81% | $2,583 | $2,583 | $2,583 | $2,583 | $99,000 |
That year-one number is the whole sales pitch. The 2-1 buyer pays $2,194 a month in year one, $515 less than the full payment, and $2,446 in year two, $263 less. The price cut buyer saves $82 a month. Not exciting.
But look at year three. The 2-1 buyer is back to $2,709 a month for the next 28 years, and the price cut buyer is still paying $2,627, and will be until the loan is paid off. The price cut buyer also brought $3,000 less to closing, since 20% of a smaller price is a smaller down payment.
Ariely’s whole thing in Predictably Irrational is how we lose our minds over anything that feels free. A $2,194 payment on a $2,709 house feels like free money. It isn’t free, it’s your $15,000 of negotiating leverage, spent in two years.
Rate buydown vs price cut after 5 and 10 years
Monthly payments only tell half the story. So lets add up everything you paid and everything you still owe at year five and year ten.
| Option | Paid out of pocket, 5 yrs | Still owed, yr 5 | 5-year total | Paid out of pocket, 10 yrs | Still owed, yr 10 | 10-year total |
|---|---|---|---|---|---|---|
| No concession ($495,000) | $261,569 | $373,855 | $635,424 | $424,138 | $342,022 | $766,160 |
| $15,000 price cut ($480,000) | $253,643 | $362,526 | $616,169 | $411,285 | $331,658 | $742,943 |
| 2-1 buydown ($9,347) + $5,653 closing credit | $246,569 | $373,855 | $620,424 | $409,138 | $342,022 | $751,160 |
| Permanent points, if 1 point = 0.25% (assumption) | $246,579 | $369,979 | $616,559 | $394,159 | $334,295 | $728,454 |
| Permanent points, if 1 point = 0.125% (assumption) | $254,000 | $371,980 | $625,980 | $409,001 | $338,254 | $747,255 |
The price cut wins against the 2-1 at both checkpoints, $616,169 against $620,424 at five years and $742,943 against $751,160 at ten.
Now the honest part, because there’s a version of this where the 2-1 looks better. If you only count cash leaving your checking account, the 2-1 buyer is ahead of the price cut buyer for about 12 years in this model. That’s real. The 2-1 hands you the seller’s money early, and the price cut hands it back $82 at a time. But the 2-1 buyer got that cash by not paying the loan down. At year five they still owe $373,855 against $362,526 for the price cut buyer, an $11,329 difference, and that comes straight out of your check at the closing table when you sell (or it rolls into your refinance). So the extra cash in years one and two isn’t savings. It’s a loan you haven’t noticed yet.
Which brings me to the part builders and lenders don’t tell buyers. I think buying down the rate is a gimmick to get you to buy. If you really can’t purchase the house at the full rate, you may not really be ready to purchase that house. A 30-year fixed payment is the best way to know whether you can afford it long term, because if you can afford the fixed payment today you can generally afford it 30 years from now. A temporary buydown only lasts a couple of years, then the rate goes back up. Getting locked into a more expensive house with a cheaper rate that’s only temporary is just not in the buyer’s best interest.
If you’re shopping right now, pull up the Travis County homes for sale and run this table against the actual list price before you write an offer. It takes five minutes (well, ten if you argue with the calculator the first time).
A 3-2-1 buydown costs more than $15,000
On a $396,000 loan at 7.28%, a full 3-2-1 buydown (4.28% in year one, 5.28% in year two, 6.28% in year three) costs $18,400. So $15,000 of seller money doesn’t even buy one, you’re $3,400 short. To keep it fair, here’s the full 3-2-1 against a price cut of the exact same $18,400.
| Option (same $18,400) | Year 1 | Year 2 | Year 3 | Year 4+ | 5-year total | 10-year total |
|---|---|---|---|---|---|---|
| Full 3-2-1 buydown ($18,400) | $1,955 | $2,194 | $2,446 | $2,709 | $617,024 | $747,760 |
| $18,400 price cut ($476,600) | $2,609 | $2,609 | $2,609 | $2,609 | $611,804 | $737,680 |
Same result, bigger gap. The price cut is $5,220 ahead at five years and $10,080 ahead at ten.
Here’s what I’m seeing. The people I see in trouble right now are the ones who bought in 2021 and 2022, or even last year, with a 3-2-1 buydown and the expectation that rates would come down before the payment stepped up. They didn’t. Rates went up. And because rates went up, values went down, so those buyers can’t get out. They’re stuck. Our numbers back up the values part: the Travis County median sold price peaked at $640,000 in May 2022 and was $495,000 in August 2026, down 22.7%, and it’s down 5.7% from August 2025.
The whole “marry the house, date the rate” line that so many agents were saying? I think it was a very foolish thing to say, and I think a lot of agents should be in trouble for it. I wrote about why “marry the house, date the rate” was always a gamble already, so I won’t repeat it here. A 3-2-1 buydown is that same bet with a two-year fuse on it.
When mortgage points are worth it, the one exception
Ok, here’s the case where the math doesn’t agree with me. A permanent buydown, where the seller’s money pays discount points that lower your rate for the life of the loan, can beat a price cut.
$15,000 is about 3.79 points on a $396,000 loan (one point is 1% of the loan). What each point buys is the fuzzy part. You’ll often hear 0.25% per point as a rule of thumb, but that’s an assumption, not a quote, and it moves from lender to lender and day to day. So I ran it both ways.
- If 1 point buys 0.25%: your rate drops to about 6.33% and your payment to $2,460, which is $250 a month less, for good. That passes the price cut on total cost a little after year five (month 62 in the model) and is $14,489 ahead at year ten. The points win.
- If 1 point buys 0.125%: your rate drops to about 6.81% and your payment to $2,583, $126 a month less. The price cut stays ahead on total cost for almost 14 years (until month 166), and it’s still $4,312 ahead at year ten.
So points only beat the price cut if your lender gives you a real rate cut per point and you keep that loan more than about five years. Sell or refinance before then and the points are gone. And here’s the irony, the one scenario where points pay off big is the one where rates don’t drop and you never refinance, which is exactly what the date-the-rate crowd didn’t plan for. If you go this route, get the lender’s rate sheet in writing showing the rate with zero points and with the points, before you ask the seller for a dime.
Sellers and builders advertising buydowns in Travis County
We scanned the public remarks on every active Residential listing in Travis County on October 2, 2026. 170 of them mention a rate buydown.
| Active Travis County listings, Oct 2, 2026 | Listings | Already cut their price | Median list price | Median days on market |
|---|---|---|---|---|
| Remarks mention a rate buydown | 170 | 71.8% | $475,000 | 57 |
| Remarks do not mention one | 6,290 | 55.5% | $475,000 | 45 |
The interesting number is the second column. The listings advertising a buydown have already cut their price 71.8% of the time, against 55.5% for everybody else, and they’ve been sitting longer, 57 days against 45. Same median price. So a buydown in the listing remarks is mostly a tell that the seller is already motivated, which means the price is the thing to negotiate.
A few more things from the same scan. 34 of the 170 spell out a 2-1 buydown and only 2 spell out a 3-2-1. 27 are new construction, out of 1,186 active new construction listings in the county (builders also bury incentives under other names, so read this as a floor). And 55 of the 170 tie the buydown to a preferred, in-house, affiliated, approved or builder’s lender. If the buydown only works with their lender, compare that lender’s full-rate quote against an outside one. A great buydown on top of a high rate isn’t a great buydown.
How I’d spend the seller’s money in 2026
Price first. If the seller won’t move on price, take the money as a closing cost credit or as permanent points (only if you’ll keep the loan five-plus years and the rate sheet shows a real drop per point). Temporary buydowns go last.
And know the ceiling. With 20% down on a conventional loan, Fannie Mae caps seller contributions at 6% of the lower of the sales price or appraised value, which is $29,700 on a $495,000 house. The caps for other down payments and loan types are in my post on negotiating seller concessions in Austin. If you’re comparing lenders, our guide to choosing a mortgage lender in Austin walks through what to ask.
Frequently Asked Questions
Lets run your numbers
Your numbers won’t be my numbers. Different price, different down payment, a lender quote instead of my rule of thumb. That’s the whole point of doing the rate buydown vs price cut math before you write the offer instead of after. I’ve been selling homes in Austin since 2009, and I’d rather spend 20 minutes with you on a spreadsheet than watch you sign up for a payment that jumps in year three. Reach out to Ed Neuhaus and lets grab a coffee and run it. Until then, be safe, be good, and be nice to people.
