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Takeout Rate Lock Gap Calculator
Lock gaps create refi shock risk.
Annual interest increase
$135,000
Base annual interest
$1,170,000
Increased annual interest
$1,305,000
How the math works
Base = loan × rate. Increased = loan × (rate + move). Annual increase = difference.
$18M × 6.5% = $1.17M base. +75 bps → $1.305M. $135k/yr increase — meaningful DSCR impact.
How to Use
- Enter perm loan amount.
- Enter base takeout rate %.
- Enter months to lock.
- Enter rate move expected bps.
- Read annual interest at each rate.
Frequently Asked Questions
What's the lock gap?
Construction loan signed today. Perm takeout rate locked at different date (30-day, 60-day, forward commitment). Gap creates rate exposure: rate moves up = higher perm rate = lower DSCR = potential takeout failure. Standard industry risk.
Managing gap?
Forward commitment (lock rate now for future close): 25-75 bps premium. Rate caps during gap. Construction-to-perm one-close: eliminates gap but single lender required. Interest rate hedges (swaps, caps): flexible but cost 0.5-2%.
Current climate?
Rising rate environment: gaps create real pain. 2022-23: many construction projects saw 150-300 bps rate moves during gap period. Perm takeout rates exceeded DSCR covenants; loans defaulted or required sponsor equity paydown. Lock earlier in rising rate markets.
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