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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our operations are interest rate sensitive. We monitor our exposure to changes in interest rates and incur both fixed rate and variable rate debt. At September 30, 2024, approximately 89% of our debt was fixed rate and 11% was variable rate. None of our market sensitive instruments were entered into for trading purposes. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact the fair value of the debt instrument but may affect our future earnings and cash flows, and may also impact our variable rate borrowing costs, which principally relate to any borrowings under our $1 Billion Revolving Credit Facility and to borrowings by TMHF under its various mortgage warehouse facilities. As of September 30, 2024, we had no outstanding borrowings under our $1 Billion Revolving Credit Facility. We had approximately $945.8 million of additional availability for borrowings under such facility including $145.8 million of additional availability for letters of credit as of September 30, 2024 (giving effect to $54.2 million of letters of credit outstanding as of such date).

Our mortgage warehouse facilities agreements as well as our $1 Billion Revolving Credit Facility use SOFR as the basis for determining interest rates. Given the limited history of this rate and potential volatility as compared to other benchmark or market rates, the future performance of this rate cannot be predicted based on historical performance. The consequences of using SOFR could include an increase in the cost of our variable rate indebtedness.

We are required to offer to purchase all of our outstanding senior unsecured notes, as described in Note 8 - Debt to the Consolidated Financial Statements in our Annual Report, at 101% of their aggregate principal amount plus accrued and unpaid interest upon the occurrence of specified change of control events. Other than in those circumstances, we do not have an obligation to prepay fixed rate debt prior to maturity and, as a result, we would not expect interest rate risk and changes in fair value to have a significant impact on our cash flows related to our fixed rate debt until such time as we are required to refinance, repurchase or repay such debt.

The following table sets forth principal payments by scheduled maturity and effective weighted average interest rates and estimated fair value of our debt obligations as of September 30, 2024. The interest rate for our variable rate debt represents the interest rate on our mortgage warehouse facilities. Because the mortgage warehouse facilities are secured by certain mortgage loans held for sale which are typically sold within approximately 20 - 30 days, its outstanding balance is included as a variable rate maturity in the most current period presented.

Expected Maturity Date

(In millions, except percentage data)20242025202620272028ThereafterTotalFair Value

Fixed Rate Debt$104.9 $148.6 $103.5 $570.6 $470.1 $519.2 $1,916.9 $1,932.9

Weighted average interest rate(1)

2.8 %2.8 %2.8 %5.4 %5.5 %5.5 %5.0 %

Variable Rate Debt(2)

$233.3 $- $- $- $- $- $233.3 $233.3

Weighted average interest rate6.7 %- %- %- %- %- %6.7 %

(1) Represents the coupon rate of interest on the full principal amount of the debt.

(2) Based upon the amount of variable rate debt outstanding at September 30, 2024, and holding the variable rate debt balance constant, each 1% increase in interest rates would increase the interest incurred by us by approximately $2.3 million per year.

TAYLOR MORRISON HOME CORPORATION 10-Q