Welcome Back to The Seller Concession Playbook

Jennifer Chicano, Your Loan Chic, is back with another episode of the Seller Concession Playbook. You negotiated the seller concession. You have the dollars on the table. Now comes the decision that most buyers and agents never think through carefully enough. What is the best way to deploy that money?

The Two Primary Options When Seller Concessions Are In Play

The two-one buydown covered in the previous episode uses seller dollars to temporarily reduce the payment during the first two years of the loan. Year one calculates at two percent below the note rate. Year two calculates at one percent below. Year three the full rate kicks in. The money the seller contributed covers the difference between the reduced payments and what the full payment would have been. The result is breathing room during the years when the financial pressure of homeownership is often highest.

The alternative is using those same seller dollars to pay discount points and permanently lower the interest rate for the life of the loan. Every payment for the next thirty years benefits from the reduced rate rather than reverting to the original after two years. The trade-off is that the upfront cost of achieving that permanent reduction is real and needs to be recovered through monthly savings before the strategy pays off.

Why One Is Not Automatically Better Than the Other

The answer depends on your goals and your timeline.

If you are moving in, furnishing the house, covering transition costs, and generally navigating the financial demands of the first couple of years of homeownership a lower payment during exactly that period has genuine practical value. The two-one buydown addresses the time when payment flexibility matters most. If you plan to refinance within a few years when rates improve the permanent buydown may never fully pay for itself before the loan is replaced.

If you plan to keep the mortgage for a long time and the break-even calculation shows that the permanent rate reduction pays off within a reasonable number of months a permanent buydown may create significantly more total value over the life of the loan. Every month past the break-even point the permanent buydown is producing savings that the temporary one stopped generating after year two.

The Framework Jennifer Chicano Uses

She does not believe in automatically recommending one strategy over the other. She compares the options and determines where the seller's dollars create the most value for the specific buyer's specific situation. What are the goals? What is the expected timeline in the home? What does the math show when both scenarios are run side by side?

Do not just negotiate the price. Have a plan for the money. Follow along for the next episode of the Seller Concession Playbook and reach out to Jennifer Chicano to build the right strategy for your specific situation before your next offer is written.

Sources

FannieMae.com
MortgageNewsDaily.com
Investopedia.com
BankRate.com