Thoughts on how to assume sofr rate increases for variable rate?
Talking about a bridge loan 2-3 years. Looking to refi in either year 2 or 3. So using sofr plus spread to figure all in rate. I am curious how to assume sofr rate increases for this. If I use a sofr rate forecast increases I've been seeing things like .2-.3 increases monthly which is agressive in calculating the all in rat. And I realize lenders will decrease spread as sofr rate increases. I'm just curious the best way to go about sofr rate increases on these short term loans, in order to best calculate interest payments.
[{"id": "i2n9l8l", "text": "Download forward SOFR curve from Chatham financial", "replies": [{"id": "i2nbqz0", "text": "This is what i was referencing actually i probably should\u2019ve said that, but i mean month to month i can\u2019t remember the exact number right now, but hypothetically i\u2019d be like at 6% all in rate in say 15 months, so would you reduce spread a bit or is this simply the best way to go about it? It seems like pretty aggressive increase in my all in rate.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i2nqzxg", "text": "Same as above using the Chatham SOFR curve. Just note that further rate hikes will steepen the curve and therefore want to build some form of premium / wiggle room in your spread if you can (typically just add 25bps to our spread)", "replies": [], "depth": 1}, {"id": "i2x8cxk", "text": "You can also get some certainty on underwriting by buying a cap (and your lender will prob require it anyway). Caps are expensive right now, but if you can meet the payments at the cap strike rate (plus the spread) then you know your worst case scenario.", "replies": [], "depth": 1}]