Due Date is a type of interest rate derivative in which the buyer receives payment at the end of each period where the interest rate exceeds the agreed strike price .
Maturity Upper Limit refers to the provisions governing the increase in interest rates on variable interest rate credit products. Interest rate limits are limits on how high interest rates can rise on variable-level debt. Interest rate limits can be instituted in all types of variable level products.
Upper Due Date Function
The upper maturity limit serves to provide benefits to borrowers in an environment of increasing interest rates. The limit can also make products with variable interest rates more attractive and financially feasible for customers.
The form of the Upper Due Date also varies, the lender has the flexibility to adjust how the interest rate limit can be arranged. There may be an overall limit on interest for a loan, the limit is the interest rate that can never be exceeded by a loan. This means that no matter what the interest rate rises during the loan period, the loan interest rate will never exceed the specified interest rate.
Determination of the Upper Due Date
The structure limitations of the Maturity Upper Limit can depend on the product the borrower chooses when choosing a mortgage or loan. If interest rates rise, interest rates will adjust higher, and borrowers may be better off choosing fixed-rate loans from the start.
Although this limits the percentage increase, the loan rate still increases in an environment of increase in rate. In other words, the borrower must be able to pay the worst case scenario on the loan if interest rates rise significantly.