Interest Rate Cap Timing

Is it best practice to initiate the purchase of an interest rate cap the day before closing or the day of closing? I have only arranged for the purchase on the day of closing but was told that there are "two schools of thought" on whether you should do the day before or the day after. Thanks in advance for any insight.

 

i would advise that you purchase of an interest rate cap.

hope that helps.

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Most Helpful

Yea you can do anything at any time, for a price. We were considering buying a forward for a swap 3 months out during a particularly tumultuous time in rate market but ultimately decided against it, it ended up working out in our favor.

At the end of the day most people don't do many derivatives far out because 1) what happens if the loan blows up and 2) most are smart enough to know we have no idea where rates are going in the next month, especially if your a RE guy who buys swaps only a few times a year. Its like guessing the stock market as a casual observer.

 

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