The amount of initial premium payable for a cap depends on factors including the amount of borrowing to be protected, the duration of that protection and the agreed Cap Rate. The greater the amount protected and the longer the duration of the protection, the higher the cost of the cap; similarly, the lower the Cap Rate (i.e. the earlier the cap protection will kick in), the higher the cost of the cap.
The actual premium for any given cap will also depend upon market conditions at the time of the cap purchase.
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