See what a seller buydown does to the same property's payment and cash flow.
A rate buydown is money paid up front, often by the seller or builder as a concession, to lower your mortgage interest rate. A lower rate means a lower monthly principal and interest payment. Rent, taxes, insurance and other operating costs don't change, so the whole payment saving shows up as extra monthly cash flow.
Two things don't change: net operating income and cap rate, because they ignore financing. That is why the same property can look like a loser at one rate and cash flow at another. The calculator below shows both rates side by side. It shows the mechanics only and is not advice on which loan to choose.
Assumes a 30-year fixed-rate loan. Cash-on-cash return uses the down payment only and excludes closing costs and the cost of the buydown. For a temporary buydown, the full rate is the payment once the buydown ends. Estimates for educational purposes, not financial advice.
Testing a real listing? In PropAnalyzer AI, change the interest rate, price or down payment on any address and watch cash flow, cap rate and the 0–100 AI score update live. Rent comps on a map show the rent behind the estimate.
This is an example, not a real listing or a rate quote. It is a single-family rental bought for $350,000 with 20% down ($70,000), so the loan is $280,000 over 30 years. Rent is $2,600 a month. Taxes are $4,200 a year, insurance $1,800 a year, and 10% of rent is reserved for maintenance and vacancy. These are the calculator's default inputs.
Two points off the rate cuts the payment by about $360 a month. The property, the rent and the cap rate are exactly the same. Only the financing changed.
A permanent buydown pays discount points at closing to lower the rate for the life of the loan. A temporary buydown, such as a 2-1 buydown, lowers the rate for the first years only and then returns to the full note rate. On a 7% loan with a 2-1 buydown, this example would look like this:
That is why it helps to check a temporary buydown at the full rate as well: it is the payment you live with once the buydown ends.
A seller may offer the same money as a buydown or as a lower price. A lower price reduces the loan, the down payment and often the property tax, and it raises the cap rate. A buydown leaves the price alone and lowers the payment. To compare them, ask what the buydown costs, then run the property twice in the calculator: once at the bought-down rate, and once at the full rate with the price lowered by the same amount. Which works better depends on the deal and the loan, so confirm the options with your lender.
For the full rental math with one rate, use the free rental cash flow calculator. Comparing analyzer apps? See PropAnalyzer AI vs DealCheck.
A buydown lowers the interest rate, which lowers the monthly principal and interest payment. Rent and operating costs stay the same, so every dollar saved on the payment goes straight to cash flow. In the example on this page, buying a $280,000 loan down from 7% to 5% cuts the payment by about $360 a month and turns -$23 of monthly cash flow into +$337. Net operating income and cap rate do not change, because they ignore financing.
A permanent buydown pays discount points up front to lower the rate for the life of the loan. A temporary buydown, such as a 2-1 buydown, lowers the rate for the first years only, for example 2 points lower in year 1 and 1 point lower in year 2, then the loan returns to its full note rate. With a temporary buydown, check the cash flow at the full note rate, because that is the payment from year 3 on.
It depends on the deal, the loan and how long you keep it, and this page does not recommend one over the other. To compare them, ask what the buydown costs, then run the property twice: once at the bought-down rate and once at the full rate with the price lowered by the same amount. Loan programs and limits on seller concessions vary, so confirm the options with your lender.
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