Seller Credit vs Price Reduction Calculator
Is a seller credit or a lower price worth more to you? Compare cash to close, monthly payment and long-run cost, including using the credit to buy down the rate.
The seller offers you the same dollar amount three ways. See what each does to your cash, payment and long-run cost.
| Seller credit toward closing costs | Price reduction | Seller credit to buy down the rate | |
|---|---|---|---|
| Price you pay | $500,000 | $490,000 | $500,000 |
| Loan amount | $450,000 | $441,000 | $450,000 |
| Interest rate | 6.500% | 6.500% | 5.944% |
| Cash to close | $55,000 | $63,700 | $65,000 |
| Principal & interest | $2,844.31 | $2,787.42 | $2,681.93 |
| Property tax per month | $500.00 | $490.00 | $500.00 |
| Monthly total | $3,344.31 | $3,277.42 | $3,181.93 |
| Net cost if you sell after 5 years | $176,908 | $173,170 | $174,372 |
| Net cost if you sell after 7 years | $242,795 | $237,739 | $235,258 |
| Net cost if you sell after 10 years | $337,809 | $330,853 | $322,857 |
Net cost = cash to close + every payment + loan balance - the original price, assuming the home sells for the original asking price and ignoring selling costs. A lower price may also have to appraise; a price cut that the market reads as the real value changes that assumption. Lower is better.
How it works
The calculator gives the same dollar amount three ways. As a closing credit it reduces cash to close up to your closing costs. As a price cut it reduces the price, loan, payment and property tax. As a buydown it pays points to lower the rate. Net cost over a holding period is cash to close plus all payments plus the remaining balance, minus the original price, assuming a sale at the original asking price.
See 2-1 vs permanent buydowns for how rate buydowns work, and estimate your total cash needed with the cash-to-close calculator.
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Frequently asked questions
Is a seller credit or a price reduction better for the buyer?
A price reduction lowers your loan, payment and property tax for as long as you own the home. A closing credit lowers the cash you need at closing. If cash is tight, the credit may matter more; if you can pay closing costs, the price cut is usually worth more over time.
Are there limits on seller credits?
Yes. Lenders and loan programs cap seller concessions as a share of the price, and the cap varies by loan type and down payment. A credit also cannot exceed your actual closing costs. Ask your lender for the limit.
Can the credit buy down my rate?
Often yes, if the loan program allows it. The third column assumes the credit pays discount points at the reduction per point you enter.
Does a lower price affect the appraisal?
A lower contract price can help a home appraise at the price; a credit leaves the price high, and the appraisal must support it. Your agent can advise on the local market.
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Analyze a property with Reaixo →Educational Use Only: Reaixo is not a lender, mortgage broker, financial advisor, or loan originator. Calculations are estimates for informational and educational purposes only and may not include every cost associated with a mortgage. Rates, APRs, fees, taxes, insurance, mortgage insurance, eligibility, and loan terms vary by borrower, property, lender, loan program, and market conditions. Verify all figures and loan terms with a qualified lender and review your official Loan Estimate before making a financial decision.