Cap Quotes Checklist: Dealer Questions Guide

Discover a comprehensive checklist for what to ask dealers when seeking cap quotes. Optimize your hedging strategy with expert insights on interest rate caps for 2026 and beyond.

Key Takeaways

Getting the best deal on interest rate caps means asking the right questions. This guide shows you what to ask dealers about price, terms, and risk. We use 2024-2025 market trends where cap costs swung wildly. You will learn how notional amounts, strike rates, and forward curves work. This knowledge helps protect you from rising SOFR rates. It also makes sure your money plan fits with 2026 forecasts.

Quick Tool: For a fast estimate, check out the Chatham Rate Cap Calculator.

Introduction: Get Smart About Cap Quotes

Picture this. You get a floating-rate loan for a property project. Then, interest rates shoot up. Your costs soar. This happened to many in 2024. The Fed held rates high all year. So, more people looked for protection.

Interest rate caps are like insurance against rising rates. But getting a good quote is not just about the lowest price. You need to ask the right questions. This ensures the cap fits your needs, saves you money, and gives you great coverage.

This guide gives you a clear checklist. We will use simple phrases like “key dealer questions” and “what to ask for cap pricing.” By the end, you can talk to dealers with confidence. You could save thousands, or even millions. This is true whether your loan is $50 million or you are planning for 2026.

First, Understand Interest Rate Caps

Before you talk to dealers, know what a cap is. It is a contract that protects you from rising floating rates, like SOFR (which replaced LIBOR). If the rate goes above your “strike rate,” the cap provider pays you the difference. This puts a ceiling on your interest cost.

In 2024, rates were high. Cap buying jumped. For a $100 million loan, a two-year cap could cost between $2.5 million and $4.25 million upfront. Prices changed fast. By 2025, rates started to ease. This created chances to lock in lower future prices.

Caps have three main parts:

Notional: The amount you are hedging.
Term: How long the cap lasts.
Strike Rate: The interest rate level you are protected against.

Other things like market volatility also change the price. Knowing this helps you ask smart questions.

How Caps Fit Your Money Strategy

Using a cap is a smart, forward-thinking move. In 2025, many people chose caps over swaps. Caps are flexible. You can end them without a penalty.

For example, if your loan is SOFR plus 2.5%, a 3% strike cap keeps your total rate at or below 5.5%. This makes your budget predictable.

Why think about 2026 now? Predictions from 2025 show SOFR could be between 2.88% and 3.5%. But it might spike higher. Asking dealers for quotes based on these guesses can lock in protection early.

Why Get Cap Quotes Right Now?

Timing is everything. In 2024, high Fed rates made cap costs jump. An upfront premium for a one-year cap could hit $2.1 million.

In 2025, the Fed cut rates. Cap prices became a bit steadier, but they still moved a lot. For property investors, hedging was key to protecting profits.

Getting quotes now lets you compare dealers and grab good deals. With 2026 looking uncertain, acting early can protect you.

How Volatility Changes the Price

Volatility is a major price driver. From 2024 to 2025, it made cap costs swing. The “insurance premium” you pay for protection got bigger. If you think rates will stay high, a cap with a strike below today’s SOFR can be a good value.

Your Must-Ask Checklist for Cap Quotes

Now for the main part. Here is your go-to list of questions for dealers. This list uses natural language like “dealer inquiries for pricing” and “checklist for negotiations.” Use these to get clear, detailed answers.

Start with the Core Terms

Get the basic structure right.

What notional amounts can you quote? Does a bigger loan get a better price?
How do different terms change the price? Ask for one-year vs. three-year costs. Longer terms often cost much more.
What strike rate is best for today’s market? Ask about 3% strikes or “step-up” options (where the strike starts low and rises). Step-ups cut costs by 10-20% in 2024.
Can we use a step-up strike to lower the cost? This was popular in 2025 for projects.

Dig Into the Price and Costs

Understand what you are paying for.

What is the exact upfront premium? Use 2024 examples for comparison. Ask for live prices.
How do key rates and volatility affect my quote? Ask about the 2026 SOFR forecast (~2.88%) and how a volatility spike could add 15-25% to your cost.
Are there ways to make this cheaper? Can you shorten the term or remove extra fees? These were often negotiable in 2025.
What part of the price is for intrinsic value vs. option value? If you think rates will stay high, a cap with more intrinsic value can be a better deal.

Check the Provider’s Reliability

Make sure the company you buy from is solid.

What is your credit rating? Does it meet my lender’s rules? In 2024, a downgrade could force you to buy a new cap.
What happens if your rating gets cut? Ask about the process for replacing the cap.
How many bids should I get? Shopping around with 3-5 dealers saved people 5-15% in 2025.
Can you give me references from other property borrowers? This builds trust.

Simplify the Paperwork and Process

Make the deal go smoothly.

What documents do I need? How long does it take? In 2025, this took 1-2 weeks.
Do you handle my lender’s paperwork for collateral? This makes things easier.
How fast can you confirm and settle the trade? Ask for 24-48 hour options. Speed helped in 2024’s fast market.
Are there small extra fees, like for SOFR rounding? These were often dropped in 2025.

Plan for Payouts and the Future

Think ahead.

How do I get paid if rates go up? You typically get money each month SOFR is above your strike.
What does it cost to end the cap early? Usually, nothing! This is a big advantage over swaps.
How do extensions work now? In 2024, extending early saved 10-20%.
What is the 2026 price forecast? If SOFR falls to 2.88%, your premium could be cut in half.

Make the Cap Fit Your Situation

Tailor it to your needs.

How does this cap match my rate outlook? Talk about your view on future rates.
Are there special options for agency loans (like Fannie Mae)? Using an escrow account cut monthly costs by 20-30% for some in 2024.
Can you show me different cost scenarios? Ask for stress tests based on volatility.
When is the best time to buy? In 2025, watching the market daily helped people catch price drops of 15%.

See the Checklist in Action

Let’s look at real cases.

In 2024, a borrower with a $50 million loan asked about step-up strikes. They got a three-year cap starting at 3.5% for $1.2 million. This was 20% cheaper than a flat strike.

In 2025, another borrower extended their cap early. They used the market’s shape to lock in a future cap for $800,000 instead of paying $1.1 million later.

These stories show how asking the right questions saves real money.

Time to Act: Ready to see what your cap might cost? Use the Chatham Rate Cap Calculator to get a quick idea.

For the Experts: Next-Level Strategies

If you know the basics, consider advanced moves. Try caps with floors, or mix them with swaps. In 2025, people used longer-term caps to guard against volatility. With 2026 property rates looking steady, now is a great time to get quotes.