Rate Cap
A derivative contract that protects floating-rate borrowers from interest rate increases above a specified level. Lenders typically require rate caps for floating-rate loans. The borrower pays an upfront premium based on the cap rate, term, and notional amount. Rate caps have become significantly more expensive in volatile rate environments.
Related Articles
Kevin Warsh Nominated as Fed Chair
Jan 30, 2026 · David R. Pascale, Jr.
Jobs Market Weakness Spurs Rate Cut Expectations; Shutdown Delays Data; Fed Gov Miran Outlines Policy Goals
Oct 3, 2025 · David R. Pascale, Jr.
Fed Goes Big (50 bps) with 50 More on Tap for 2024, Treasury Yields Go Up, What’s Next?
Sep 20, 2024 · David R. Pascale, Jr.
Related Terms
SOFR (Secured Overnight Financing Rate)
The benchmark interest rate that has replaced LIBOR for floating-rate commercial real estate loans. SOFR is based on overnight repurchase agreement transactions and is considered more reliable than LIBOR. Floating-rate loans are typically priced as SOFR plus a spread, with rate caps often required to limit interest rate exposure.
Bridge Loan
Short-term financing (typically 1-3 years) used to "bridge" the gap between acquisition/repositioning and permanent financing. Bridge loans are ideal for value-add strategies, lease-up, renovation, or properties that don't qualify for traditional permanent financing. They feature higher rates and more flexible terms than permanent loans.
Have Questions About CRE Financing?
Our experienced team can help you navigate the complexities of commercial real estate capital markets.
Contact Us