A seller has agreed to a concession. Good. Now there is a real decision to make, and most transactions make it by accident.
The same dollars can buy a temporary buydown, which cuts the payment deeply for a few years and then steps up, or a permanent buydown, which lowers the rate modestly for all thirty years. These are different products solving different problems, and picking the wrong one wastes the seller's money.
What each one does
Temporary buydown. A lump sum sits in escrow and subsidizes the payment on a sliding scale, commonly two points off in year one and one point off in year two, or three, two and one across three years. Then the subsidy ends and the buyer pays the note rate for the remaining term. The rate on the note never changed.
Permanent buydown. The same money is paid to the lender as discount points at closing, which buys the note rate itself down. The buyer's rate is lower on day one and lower in year twenty nine. Nothing steps up, ever.
Same cost. Opposite shapes. The temporary is a deep cut that expires. The permanent is a shallow cut that never does.
The breakeven, in plain terms
Money spent on a temporary buydown is consumed within two or three years and delivers a large monthly benefit while it lasts. Money spent on a permanent buydown delivers a smaller monthly benefit forever.
Which wins depends almost entirely on one variable: how long the buyer keeps this loan.
A buyer who refinances or sells inside three years captures nearly all of the temporary buydown's value and only a fraction of the permanent one's. A buyer who holds the loan for a decade or more comes out well ahead with the permanent reduction, because the small monthly saving compounds over a very long period while the temporary subsidy was spent and gone.
The crossover generally sits somewhere in the middle single digits of years. Have it calculated for the specific loan rather than guessing, because the loan amount and the note rate both move it.
The three questions that decide it
1. How long is this buyer realistically staying?
Not how long they say. How long people in their situation actually stay. A relocating executive, a first job out of residency, a buyer who has moved every four years for two decades: these are short holds and the temporary buydown fits them. A family buying the house they intend to raise children in is a long hold, and the permanent reduction is the better use of the money.
2. Is the buyer tight on qualifying, or tight on cash flow?
This one matters more than the breakeven, and it frequently decides the question on its own.
A temporary buydown generally does not lower the rate the underwriter uses. Most programs qualify the buyer at the note rate. So a buyer who cannot be approved at the note rate gets nothing useful from a temporary buydown.
A permanent buydown lowers the note rate itself, which means it lowers the qualifying payment. For a buyer who is a hair over on debt-to-income, the permanent buydown can be the difference between approved and declined. That is a categorical difference, not a preference.
The third option, and frequently the best one in this market, is a program designed to deliver both: a reduced rate that the buyer actually qualifies on. That is what List & Lock is built to do, and it changes the pool of buyers who can get approved on the house rather than only the pool who like the payment.
3. What is the listing trying to accomplish?
If the problem is that the phone is not ringing, the temporary buydown produces the headline number that gets attention. A first year rate in the fours stops a scroll. A permanent rate a half point under market does not.
If the problem is that a specific buyer is under contract and struggling to qualify, the permanent buydown is the tool.
Marketing problem, temporary. Qualifying problem, permanent. That is the shortest version.
A structure worth considering: split the concession
Nothing requires the whole concession to go one direction. A seller with meaningful contribution room can fund a smaller temporary buydown for the marketing headline and apply the remainder to a permanent reduction, or to closing costs that free the buyer's cash for a larger down payment.
This is where having the lender in the conversation before the counteroffer goes out is worth real money. The seller has a fixed number of dollars. How they are allocated determines whether those dollars produce a sale.
What does not change either way
- Contribution caps apply to the total. See Seller Concession Limits by Loan Type.
- Both are real costs paid by a real party at closing.
- Neither fixes a pricing problem. See Seller Concession vs Price Reduction.
- Both have to be marketed to produce showings. See How Listing Agents Should Market the Payment.
Why bring this to us
- We run the numbers before the listing goes live, so the figure in your marketing is a real locked rate rather than a hope.
- Broker model. Multiple investors, which matters when one lender's buydown terms do not fit the file.
- We will sit in the listing appointment with you and explain the structure to the seller directly.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
Send me the address and the price before the next reduction, and I will show you what a concession pointed at the payment does instead.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Buydown structures and any figures shown are illustrative, derived from a structure applied to an assumed note rate, and are not an offer or a quote. Actual rates depend on credit approval, loan program, occupancy, loan amount, down payment, property type and market pricing at lock. Seller contribution limits vary by loan type, occupancy and loan-to-value and change over time; confirm current limits against the buyer's specific loan. Rates, terms and program guidelines change and depend on credit approval, property appraisal and other qualifying factors. Not all applicants will qualify.
Looking at a specific home? Send me the address and I will run the numbers: rickykhamis.com/analyze
