Price cut or seller credit: which saves you more?

Say a seller is willing to give you $10,000. You can ask for it off the price, or as a credit.

They sound the same. They are not. Here is an example.

This is an example only

What a credit buys changes every day, and it changes by lender. Your numbers will be different.

Where you start

On a $500,000 loan at 7.25 percent, principal and interest is about $3,411 a month.

Option 1: a $10,000 price cut

Take $10,000 off the price. Now you borrow $490,000 at the same rate.

The payment is about $3,343. That saves about $68 a month.

Option 2: a $10,000 seller credit

Now say the seller gives you a $10,000 credit instead. It buys your rate down to 6.75 percent on the $500,000 loan.

The payment is about $3,243. That saves about $168 a month.

Same $10,000. Very different result.

So which is better?

A rate buydown helps most if you keep the loan for years.

A price cut also lowers the amount you owe.

Talk to your lender about how long you plan to keep the loan. Then we can decide what to ask for.