Cost Of Funds Index
The Cost of Funds Index (also known as COFI) is an interest rate benchmark similar to the . It is calculated on a monthly basis, and published on the last business day of the month. The COFI is a weighted average of paid by financial institutions in , , and . The interest rates measured relate to the checking accounts, savings accounts, and CDs of the institutions in question.
Use with Mortgages
In addition to being used as a general lagging indicator of interest rates, the COFI is used to determine interest rates for some . This is especially true of mortgages originated in the Western United States. The COFI does not utilize interest rate caps, but is considered a stable, low volatility index. This has made it an attractive reference for some newer and more complex mortgage products, including .
As with other interest rate benchmark influences, the COFI does not affect any other . Such reference rates only influence adjustable rate mortgages.
Valuable Information
As with the base index, many COFI-based mortgages do not include rate caps. Such mortgages can be dangerous for unsuspecting . When applying for an adjustable rate mortgage, it is advisable to identify the mortgage's interest rate benchmark. The mortgage's should also be noted, as well as the introductory fixed rate period and any mortgage prepayment penalties. These factors can have a significant impact on how the mortgage evolves and what course of action the borrower should take.
If the concepts behind the COFI overwhelm you, with a mortgage professional, like a mortgage planner. can help you select the best mortgage for your financial needs, and explain how to use your mortgage to secure your home and plan for the future.
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