CazaA lower rate or a lower price?
Both lower the monthly payment, but they work differently. A rate drop reduces the interest charged on the whole loan. A price cut reduces the loan itself. This calculator turns one into the other, so you can see what a half-point drop is worth in price, and what a 3% cut is worth in rate.
Payments come from the standard fixed-rate amortization formula. It covers principal and interest only, so property tax, insurance and mortgage insurance are left out, and your lender’s quote will differ.
Using it in an offer
A seller who will not cut the price may still pay for a rate buydown, and the reverse is also true. Knowing the matching number helps you decide which to ask for. The price-cut guide explains what a cut says about a seller, the low-offers guide covers how to write the offer, and the days-on-market guide shows how long a listing has really been for sale.
The formula
Monthly payment = loan × r ÷ (1 − (1 + r)−n), where r is the annual rate ÷ 12 and n is the number of monthly payments.
The matching price cut is the percent that gives the same payment at your current rate: 1 − (payment factor at the lower rate ÷ payment factor at the current rate). The down payment stays the same percent of the price.
Worked example
| Price, 20% down, 30-year fixed | $650,000 (loan $520,000) |
| Payment at 6.75% | $3,373 |
| Payment at 6.25% (0.5-point drop) | $3,202 |
| Monthly saving from the rate drop | $171 |
| Price cut that saves the same | 5.07% ($32,952) |
| A 3% cut ($19,500) instead saves | $101 a month, about a 0.29-point rate drop |
Principal and interest only. Tax, insurance and mortgage insurance are left out.
FAQ
Is a lower rate better than a price cut?
On the monthly payment, a half-point drop matches a price cut of roughly 5% when rates are around 6 to 7%. A price cut also lowers your down payment, property tax and loan balance, while a rate buydown only helps while you keep the loan.
How much does a 0.5% lower mortgage rate save?
On a $520,000 30-year loan at 6.75%, dropping to 6.25% saves about $171 a month. Enter your own numbers above for your loan.
Does this include taxes and insurance?
No. It compares principal and interest only, on a fixed-rate loan. Your lender’s quote will differ.
Caza shows days on market, price cuts and nearby sales on Zillow listings.
Try CazaCaza is independent and not affiliated with Zillow. These are estimates, not financial, tax or legal advice.