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Rate Cap Renewal Premium Calculator
Cap renewals in volatile markets spike cost.
Renewal premium
$1,125,000
Original premium
$375,000
Increase amount
$750,000
How the math works
Original = notional × %. Renewal = original × multiplier.
$25M × 1.5% = $375k original. × 3x = $1.125M renewal. $750k increase — stark.
How to Use
- Enter notional.
- Enter original premium %.
- Enter renewal multiplier.
- Read renewal premium and increase.
Frequently Asked Questions
Why renewal premium?
Original cap bought in calm market. Renewal at year 2-3 in volatile market carries 2-5x cost. Rates, volatility, time-to-cap distance all affect price. Major refinancing obstacle for floating-rate loans.
Typical multipliers?
Stable rate environment: 1.0-1.5x original. Mid-volatility: 1.5-2.5x. High volatility (2022-24): 2-5x. Some cases: uneconomic, forces refi to fixed. Pre-fund reserves for expected premium increases.
Alternatives?
Refi to fixed rate (if market allows). Extend cap at original strike for fee. Buy longer-term cap upfront (higher initial cost, lower renewal risk). Interest rate swap (alternative hedge).
How does this interact with the rest of the capital stack?
Each tier of the stack affects the next. Senior debt constrains LTC and DSCR. Mezz and pref consume equity spread. Interest rate hedges protect DSCR but cost premium. Always model the full stack holistically — optimizing one tier alone often degrades another. Institutional underwriters run three or four scenarios across the stack before committing capital.
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