What is a COFI Mortgage

Local Mortgage Information for Your Area

Mortgage Tools

Search Articles

What is a COFI Mortgage?

Perhaps one of the most complex and confusing types of mortgages, the COFI-or Cost of Funds Index Mortgage-is most simply a type of adjustable-rate mortgage (ARM).

The two key factors that separate a COFI loan from an ARM are that a COFI's rate is adjusted each month, and borrowers are given options on how to pay the loan (including paying interest only).

advantages: The payment options are probably one of the best advantages, but only for savvy borrowers. It is also relatively easier to get this loan than other kinds.
Of the Indices an ARM could be tied to, the COFI is the slowest to change. In a rising interest rate environment, this could help the borrower.
disadvantages: Unlike most ARMs, there is no rate cap. Additionally, the lure of small payments can result in negative amortization (where the loan actually grows, even though payments are being made).
Of the Indices an ARM could be tied to, the COFI is the slowest to change. In a falling interest rate environment, this can be very detrimental to the borrower.

Once a borrower determines if they are more inclined to get an ARM, then the question emerges of which index the ARM should be tied. The answer to this question is beyond the scope of this simple guide.

For more information, it is best to discuss this with a qualified financial advisor or lender.

Next: Do you want to learn more about where to get a mortgage or would you like to be matched with up to five mortgage lenders?

The content provided above (the "Content") is supplied in good faith using references and sources deemed reliable, however it is published strictly on an "as-is" basis. Nextag, Inc., on behalf of itself and its affiliates hereby disclaims any and all express or implied warranties to the maximum extent permitted by law. Despite our good faith efforts we cannot provide any assurance that the Content is accurate or error free, or up to date. We disclaim any obligation to update the Content. The Content is provided for informational purposes only and is not to be construed as financial or legal advice. Everyone's financial circumstances are unique. You are urged to consult multiple informational sources and a professional advisor before making any decisions affecting your personal finances. For more information please consult our website Terms of Use which also apply.