Trying to choose between offering a mortgage rate buydown or a price cut on a Chandler home? You are not alone. Buyers here watch monthly payments closely, and sellers want a clear path to a successful closing. In this guide, you will see how each option works, what it costs, and how the numbers play out at common Chandler price points so you can decide with confidence. Let’s dive in.
Rate buydown vs price cut: what they mean
Temporary 2/1 buydown
A seller-funded 2/1 buydown places money in an escrow account to lower the buyer’s interest rate for the first two years. In a typical structure, the buyer’s rate is 2 percent lower in year 1 and 1 percent lower in year 2, then it returns to the full note rate. The seller’s cost is the subsidy that covers the difference between the reduced payments and the full payment during those two years.
Permanent buydown with points
A permanent buydown uses discount points paid at closing to reduce the note rate for the life of the loan. One point equals 1 percent of the loan amount, and the rate reduction per point varies by lender and market. As a ballpark, about two points can reduce a rate by roughly 0.50 percent in many markets, but actual pricing depends on the lender.
Price reduction
A price cut lowers the contract price. If the buyer’s down payment percentage stays the same, a lower price reduces the loan amount and permanently reduces monthly principal-and-interest. It also lowers the property’s taxable value basis slightly and can influence future comparable sales because the lower price appears in the public record.
Chandler-specific factors to weigh
- Comps and appraisals. A price cut changes the recorded sale price and can influence future comps in your neighborhood. A buydown preserves the contract price, which can help maintain higher comparable values.
- Market tempo. Chandler is part of the greater Phoenix metro where inventory and pricing can shift quickly. In a faster market, preserving price with a buydown can be attractive. In a slower stretch, a visible price cut may draw more attention and improve appraisal comfort.
- New construction vs resale. Builders often use buydowns as marketing tools without dropping list prices. Individual resale sellers focus more on net proceeds and time on market, so the choice should match your goals.
- Taxes. A price cut can slightly reduce the taxable value and property taxes, while a buydown does not affect assessed value. Expect the tax impact to be modest compared with the mortgage payment impact.
- Loan program rules and qualification. Some lenders underwrite buyers at the full note rate even when a temporary buydown is in place. Others may allow reduced-payment qualification in specific cases. Confirm with the lender early. Conforming loan limits apply in Maricopa County. Many buyers in 2024 use a one-unit conforming limit of about $726,200, while higher-priced homes may require jumbo financing with different concession rules.
The numbers at Chandler price points
To keep things apples to apples, the examples below use these assumptions: 30-year fixed, 20 percent down, and a 6.75 percent note rate. Payments shown are principal and interest only.
Baseline monthly P&I at 6.75 percent
- $400,000 price, $320,000 loan: $2,076 per month
- $600,000 price, $480,000 loan: $3,114 per month
- $900,000 price, $720,000 loan: $4,671 per month
Scenario A: $15,000 price reduction
- Buyer’s loan drops by 80 percent of the cut, or $12,000, assuming the same down payment percentage.
- Monthly P&I falls by about $78 per month for the buyer. This permanent savings is the same across these price points for the same $15,000 cut and rate.
- Seller cost: $15,000 one time.
Scenario B: Seller-funded 2/1 buydown
Using the $600,000 example ($480,000 loan):
- Year 1 payment at 4.75 percent: $2,503 per month, about $611 lower than baseline.
- Year 2 payment at 5.75 percent: $2,801 per month, about $313 lower than baseline.
- Year 3 and beyond: returns to $3,114 per month.
- Estimated seller cost to fund the two-year subsidy: about $11,088, which is roughly 2.31 percent of the loan. Costs scale roughly with loan size, so about $7,392 at a $320,000 loan and about $16,632 at a $720,000 loan.
What this means for you: temporary buydowns deliver large near-term payment relief for buyers and keep the recorded sale price intact. After year 2, the loan reverts to the full payment.
Scenario C: Permanent rate buydown of 0.50 percent
Using the $600,000 example ($480,000 loan):
- New rate: 6.25 percent. New monthly P&I: $2,955, about $159 less than baseline each month.
- Illustrative seller cost: about 2 points, or roughly $9,600.
- Payback period for the buyer’s savings vs. seller cost is about 5 years. The savings continue for the life of the loan.
What this means for you: a permanent buydown creates smaller monthly savings than a 2/1 in the first two years, but the savings last long term and can be attractive for buyers planning to stay.
What tends to work best in Chandler
It depends on your goals and the market feel in your neighborhood.
- If you want to preserve list price and neighborhood comps. A temporary buydown often fits. It delivers strong payment relief for buyers in years 1 and 2 without lowering the recorded sale price.
- If you want a clear, visible value signal and broader search visibility. A price reduction can help, especially in slower weeks when a lower price draws more eyes and may improve appraisal comfort.
- If the buyer plans to stay long term. A permanent buydown offers steady, ongoing savings that compound over time.
Be sure to check whether the buyer’s lender will underwrite at the full note rate or allow qualification based on the reduced initial payments. That single detail can determine whether a temporary buydown simply helps cash flow or also helps the buyer qualify.
Quick rules of thumb
- A 2/1 buydown often costs about 2 to 3 percent of the loan and gives the biggest payment drop in years 1 and 2.
- A 0.50 percent permanent rate reduction can cost about 2 points and typically saves far less per month than a 2/1 in the early years, but lasts for the life of the loan.
- A $15,000 price cut lowers a buyer’s 20 percent down loan by $12,000 and saves about $78 per month at a 6.75 percent note rate.
A simple decision checklist
For sellers:
- What matters most right now: net proceeds, preserving comps, or speeding the sale by improving buyer monthly payments?
- Compare dollar-for-dollar impact. For the same outlay, will a buydown or a price cut deliver more perceived value to your target buyer profile?
- Confirm lending details. Will the buydown help the likely buyer qualify, or will it only improve cash flow?
For buyers:
- Do you need near-term payment relief for the first one to two years? If yes, a 2/1 buydown is often the best fit.
- Do you plan to stay long term and value lower lifetime interest? Permanent points or a negotiated price cut tend to help more.
- Ask your lender how they will underwrite your loan with a buydown in place and what concession limits apply for your loan type.
Next steps for Chandler buyers and sellers
Use the examples here as a starting point, then plug in your exact numbers. Get current rate quotes, a real buydown cost from your lender, and your neighborhood’s pricing and inventory trend. From there, you can compare seller outlay, buyer payment in years 1 and 2, and the long-term payback if considering permanent points. If you want a friendly walkthrough of the options for your specific Chandler home, reach out and we will run the scenarios together and tailor the strategy to your goals.
Ready to compare your options or price your home? Connect with Rebecca Smith Real Estate for personalized guidance and request your free home valuation.
FAQs
What is a 2/1 buydown and how does it work?
- A 2/1 buydown is a seller-funded escrow that lowers the buyer’s rate by 2 percent in year 1 and 1 percent in year 2 before returning to the full note rate in year 3.
Does a buydown help me qualify for a mortgage in Chandler?
- It depends on the lender and loan program; many underwrite at the full note rate, while some allow reduced-payment qualification in specific cases, so confirm early with your lender.
How does a price reduction affect comps in Chandler?
- A price cut changes the recorded sale price and can influence future comparable sales, while a buydown preserves the contract price and does not change recorded comps.
Are seller concessions for buydowns limited by loan type?
- Yes, seller-paid buydowns count as concessions and must follow agency and lender limits and documentation rules, which vary by program.
What are the typical costs and savings of a buydown at $600,000?
- For a $480,000 loan at 6.75 percent, a 2/1 buydown can cost about $11,088 and lower payments by about $611 per month in year 1 and $313 in year 2 before returning to baseline.
