@Andy T. Basically it an option where the seller is technically prepaying your mortgage interest for you. So if the normal rate is 7% and the new buydown rate is 5% the first year and 6% the second year, the savings per month from the difference at each rate is paid upfront by the seller for you. I find if you're not getting closing costs paid by the seller for the buy down AND normal costs, then it's really just kind of smoke and mirrors.
If the seller-paid buydown is 8k, hypothetical numbers, and that is all you can negotiate, and your closing costs are 8k... You are still 8k out of pocket if you take the buydown. So the question just becomes do you want to write a check for 8k at closing just for a lower payment or do you want to keep your 8k in pocket? We can say it's "less interest," but since interest is front-loaded in a mortgage, you're still paying a large chunk regardless.
The short-term lower rate doesn't always mean better savings because at the end of the day, you will still be keeping the mortgage and there is no proof that rates will actually be lower in the next 1-2 years. Plus if you get the opportunity to refinance then it kind of gets irrelevant.
Not saying the option is a bad one, but there is more to the numbers that you might have to consider if you are not getting money outside of just the buydown.
