📊 Interest Rate Cap Calculator
Calculate the cost and benefits of interest rate cap protection for commercial loans
Loan & Cap Details
Rate above which cap provides protection
Margin above reference rate
Higher volatility = higher cap premium
ESTIMATED CAP PREMIUM
$383K
7.658% of loan amount
766 basis points
$76,583/year amortized
Key Metrics
vs. Fixed Rate Alternative
Total 5-year cost: $1.25M
Total 5-year cost: $2.01M
Rate Rise Scenarios
| Scenario | Reference Rate | All-In Rate | Capped Rate | Annual Interest | Cap Payment | Net Cost |
|---|---|---|---|---|---|---|
| Current (No Rise) | 3.50% | 6.00% | 6.00% | $300K | — | $300K |
| Moderate Rise (+1%) | 4.50% | 7.00% | 7.00% | $350K | — | $350K |
| Significant Rise (+2%) | 5.50% | 8.00% | 7.50% | $400K | $25K | $375K |
| Major Rise (+3%) | 6.50% | 9.00% | 7.50% | $450K | $75K | $375K |
Cap provides protection when reference rate exceeds 5.00%. All figures are annual.
How Interest Rate Caps Work
Protection
An interest rate cap protects floating-rate borrowers from rate increases above the strike rate. You pay an upfront premium for this insurance.
Payments
When SOFR exceeds the cap strike, the cap issuer compensates you for the difference, effectively capping your interest rate.
Pricing Factors
Cap premium depends on: strike rate vs. current rate, loan term, rate volatility, and market expectations. Higher volatility = higher premium.
⚠️ Important Disclaimer:This calculator provides estimates based on simplified pricing models. Actual cap premiums vary by lender, market conditions, counterparty credit risk, and specific loan terms. Consult with a derivatives specialist or treasury advisor for precise quotes. Interest rate caps are complex financial instruments; ensure you understand the terms before purchasing.