Rate Caps Costs Soar Even Higher

  • Oct. 17, 2022
  • GlobeSt.

Marcus Duley, chief investment officer of Walker & Dunlop Investment Partners, sees borrowers pouring money into rate caps because lenders insist. “In some instances, lenders are requiring borrowers to purchase day-one in-the-money caps where the strike rate is less than the current index rate being hedged,” he says. “In some ways, the interest rate cap premium can be looked at as prepaid interest capitalized in to deal where otherwise interest would have been paid from cash flow.”

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