DECEMBER 12TH, 2018

COFI Mortgage Loans

What does COFI stand for? COFI means “Cost of Funds Index.” COFI is THE most popular of Adjustable-Rate Mortgage Indexes. Basically, it mirrors the interest rate paid by the 11th Federal Home Loan Bank District savings establishments and that represents savings establishments headquartered in Nevada, Arizona as well as California. A consumer may wish to consider a COFI Mortgage loan if they are seeking a safer Adjustable-Rate mortgage. Should a consumer’s ARM be indexed via COFI they will still reap the benefits of interest rates that “follow” the market, but due to the fact that COFI changes at a slower rate, the risk factor involved is lower. In addition to the 11th District COFI, other indexes are the Federal Cost of Funds and National Monthly Median Cost of Funds indexes.

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About COFI Mortgages

Consumers may have some questions not covered so far and some of those will be addressed in this section. For instance:

For What Purpose Would a Consumer Desire a COFI Mortgage?
Consumers may be interested in this type mortgage program should they desire a mortgage that reacts slowly to its market. This mortgage is an ARM product linked to the COFI Index. This index is slow-reacting as it is based on interest paid on savings accounts; its reaction period is a benefit to consumers should rates begin to rise but keep in mind it would not be beneficial if rates begin to drop.

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What About Negative Amortization with a COFI?

The potential of negative amortization does not exclude COFI.

What About Payment Caps on COFI Mortgages?

Although most COFI mortgages have payment caps, they do not have “periodic” interest rate caps.

Common Questions: Advantages & Disadvantages of COFI Mortgages

The premium advantages of COFI Mortgages are: 1) The most stable as well as slowest movers of all ARMs. In order to make it more stable, it smoothes out a great deal of volatility in the market.

The main disadvantage of COFI Mortgages are: 1) Although COFI typically follows trends in the market, it can also potentially move in the opposite direction.

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