How Seller-Paid Rate Buydowns Work in Los Angeles (And When to Ask for One)

How Does a Seller-Paid Rate Buydown Work in Los Angeles?

A seller-paid 2-1 buydown is a seller concession where the seller funds an escrow account at closing to cover the gap between your actual mortgage rate and a temporarily reduced rate. In year one, your rate drops by 2 percentage points. In year two, it drops by 1 point. In year three and beyond, you pay the full note rate. In LA's current buyer's market, where nearly 45% of sellers are offering some form of concession, this tool has come back in a big way.

By Paul Blair | October 17, 2026

Here's the question I'm hearing from buyers across Los Angeles right now: "Can I get the seller to help me with my rate?"

The short answer is yes, and the 2-1 buydown is one of the most effective ways to do it.

With over 47% more sellers than buyers in national markets and days-on-market ticking up across multiple LA submarkets, sellers need a reason to close. A 2-1 buydown gives you real payment relief in the years when you need it most, without asking the seller to cut the price.

What Is a 2-1 Buydown and How Does It Work?

When a seller agrees to fund a 2-1 buydown, they deposit a lump sum into a dedicated escrow account at closing. Your loan servicer draws from that account each month to cover the gap between your actual payment and the reduced-rate payment.

The structure works like this:

• Year 1: Your rate drops by 2 percentage points from your note rate
• Year 2: Your rate drops by 1 percentage point from your note rate
• Year 3 onward: You pay the full note rate as locked in

If your note rate is 6.5%, you pay at 4.5% in year one and 5.5% in year two. The buydown escrow covers the difference.

One thing to be clear about: you qualify at the full note rate. The buydown doesn't change your borrowing power. It's a payment subsidy, not a lower rate loan.

If you sell or refinance before the buydown period ends, any remaining funds in the escrow account come back to you. That's a meaningful detail if you're thinking you'll refinance when rates come down.

What Does This Actually Save You in LA?

Let me run the numbers on a $2 million purchase with 20% down, a $1.6 million loan at 6.5%.

Your base payment at 6.5% is approximately $10,115 per month in principal and interest.

With the 2-1 buydown:

• Year 1 at 4.5%: approximately $8,111/month (saves about $2,000/month)
• Year 2 at 5.5%: approximately $9,075/month (saves about $1,040/month)
• Total 2-year savings: approximately $36,480

The cost to the seller to fund this buydown is that same $36,480. So when you negotiate for it, you're essentially asking the seller to put $36,480 in an escrow account that directly lowers your payment.

Compare that to a price cut. If the seller drops the price by $36,500 instead, your monthly savings over 30 years is roughly $230/month at 6.5%. The 2-1 buydown delivers far more value in the near term, which is exactly when most buyers need cash flow relief.

For a $1.5 million purchase with 20% down at 6.5%, the numbers look like this:

• Year 1 at 4.5%: approximately $6,083/month (saves about $1,504/month)
• Year 2 at 5.5%: approximately $6,806/month (saves about $781/month)
• Total 2-year savings: approximately $27,450

These are real dollars. And in a market where payment shock has been stopping buyers from pulling the trigger, this can be the difference between signing and walking.

Why Sellers in LA Are Open to This Right Now

This is worth understanding from the seller's perspective, because it helps you know how to ask.

Sellers in the Hollywood Hills, Beverly Hills, Bel Air, and across the Westside have spent the last two years watching a market shift under their feet. Days on market are up. Price reductions are more common. And yet most of these sellers have significant equity and a strong psychological attachment to their list price.

A 2-1 buydown solves a real problem for them: it lets the seller deliver meaningful value to the buyer without cutting the price.

Price cuts reduce comparable sales, which affects every other property in the neighborhood. A seller concession doesn't. It shows on the HUD-1 but doesn't directly affect the recorded sale price in the same way a lower price does.

That's a real incentive for sellers in comp-sensitive luxury submarkets. When you frame your request correctly, you're not asking them to take less for their home. You're asking them to help you afford the payment.

If you're curious how concessions interact with your agent's compensation under the newer CAR contract rules, this post covers how seller concessions work in Los Angeles today.

How to Ask for a Seller-Paid Buydown in Your Offer

You request it through the seller concession line in the CAR Residential Purchase Agreement (RPA). The credit is structured as a closing cost credit, and the lender then uses that credit to fund the buydown escrow at close.

When writing the offer, your agent specifies the dollar amount of the credit, which should equal the total cost of the buydown. Your lender calculates that number based on your loan amount and note rate.

Loan program concession limits matter here. Your lender will confirm what applies to your loan, but the general caps are:

• Conventional loans: 3% to 9% of the purchase price, depending on your down payment
• FHA loans: up to 6% of the purchase price
• VA loans: up to 4% of the purchase price

On a $2 million conventional purchase with 20% down, the 3% cap means the seller can contribute up to $60,000 in concessions. A $36,480 buydown fits well within that.

The credit doesn't have to be used only for the buydown. If there's room under the cap and you have other closing costs, your lender can sometimes structure it to cover both. That conversation happens with your lender before you make the offer.

2-1 Buydown vs. Paying Permanent Points: Which Is Better for LA Buyers?

This is a question I get often, especially from buyers who've read up on discount points as a way to lower their rate permanently.

The comparison depends on your time horizon and your cash position.

If you're buying a forever home and have the cash at closing, buying permanent points to get to 5.75% or 6% might pencil out over 10 to 15 years. But in LA, a lot of buyers in the $2M-$5M range are thinking about their next move in 5 to 7 years, or they're planning to refinance when rates normalize.

For that buyer, the 2-1 buydown is almost always better. You get outsized savings in years one and two without spending your own cash. And if you refinance before year three, you pocket what's left in escrow.

For a deeper comparison of the permanent buydown option, this post walks through how mortgage points work for LA buyers.

What the Seller Pays at Closing

If you're asking a seller to fund a buydown, it helps to understand their total closing cost picture. In Los Angeles, sellers are already writing checks for documentary transfer tax, Measure ULA (if applicable), and agent commissions. A $36,000 to $40,000 buydown credit on top of that is significant but not unusual in the current market.

For sellers at or above the Measure ULA thresholds (currently 4% at $5.4 million and up, 5.5% at $10.9 million and up), the concession math changes, but the logic is the same: a concession that closes the deal at list price often nets more than a price cut.

Here's a breakdown of what LA sellers typically pay at closing if you want to understand the full picture from the seller's side.

Frequently Asked Questions

Does a 2-1 buydown lower my qualifying rate?

No. You qualify at the full note rate on your loan. The buydown is a payment subsidy funded by the seller, not a change to your loan terms. Your lender underwrites you at the rate shown on your Note, not at the reduced year-one rate.

What happens to the buydown funds if I sell or refinance early?

Any unused balance in the buydown escrow account is returned to you at payoff. So if you refinance in year two, whatever remains from the year-one balance comes back to you. This is a meaningful benefit if you expect to refinance when rates fall.

How do I know how much to ask the seller to contribute?

Your lender calculates the exact buydown cost based on your loan amount and note rate. You should have that number before you make the offer. Your agent then writes the credit amount into the RPA's seller concession line. Ask your lender for the buydown quote early in the process.

Can the seller fund both a buydown and my closing costs?

Sometimes yes, depending on your loan program's concession cap. On a conventional loan with 20% down, the seller can contribute up to 3% of the purchase price toward closing costs, which on a $2 million purchase is $60,000. If your buydown costs $36,000 and your closing costs total $20,000, you may be able to negotiate both under the cap. Your lender confirms what fits.

Is a 2-1 buydown only useful if rates are high?

It's most valuable when there's a meaningful gap between today's rates and where you expect rates to land in the next few years. If you believe you'll refinance within 24 to 36 months, the buydown delivers near-term cash flow relief while you wait. In a flat-rate environment where you plan to hold long-term without refinancing, it's still useful but the permanent points comparison becomes more competitive.

Ready to Run the Numbers for Your Situation?

Every deal is different. The right concession structure depends on your loan amount, down payment, the seller's equity position, and how the property is priced relative to the market.

If you're active in the LA market right now and want to understand how to structure an offer that actually gets accepted, I'd be glad to walk through it with you. Connect with the Grey Square team here, or get a home value estimate if you're on the selling side.

About Paul Blair

Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas, Los Angeles and Houston. With 22 years in the business and more than $140 million in closed transactions, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 · CA DRE #01792671.