COSI Loan-A type of ARM based on cosi index rate

Hi dk,

Your query has been answered in this section.

Hope it will help you.

Thanks,

Caron.

We are trying to decide whether to go to a cosi. Our house needs some work and we will get quite a bit of money. We plan on being here for a long time. We would like to get the work done and then work very hard to pay the loan off. we have a 6.5 fixed right now and we can afford to pay a little more on our mortgage. We would also be able to open up some money flow with being able to pay off some bills with the excess money from the cose. What do you think?

Hi Lisa,

Welcome to MortgageFit Forums.

It depends on the requirement and the plan that you have for your repayments.

A COSI loan has a stable index and offers you flexibility with your loan terms.

Your margin will depend on a lot of criteria including your score and LTV. The rates are attractive but you must also be aware that your principal loan amount goes up with time as you pay these low rates. The deferred interest is added back.

Check with the lender on how the rate is calculated and a way to track any change in the rate, before you actually take a COSI indexed mortgage.

A good mortgage broker can guide you after getting all the required information from you.

God bless you.

For MortgageFit,
Samantha

Thanks Samantha - I'm new at this. Do you mean the credit score? and what does LTV stand for?

Hi Lisa,

"what does LTV stand for?"

The Loan-to-Value (LTV) ratio is the loan amount expressed as a percentage of either purchase value or the appraised value of the property.

To know more about the LTV, read the article on "Loan-to-Value ratio".

Thanks

We just refied 3 months ago from an I/O ARM to a fixed 30-yr at 6.125%.
While looking for a HELOC I had a broker bring up a COSI loan to me. I'd never heard of it. Sounds too good to be true. He claims that my payments will be $1000 lower, and that for the next 8 years every year it can go up no more than 7.5%- that to figure out possible highest payments over the next eight years I'd just multiply my monthly payment by 7.5 every year, which would add about $75 the first year, $85 the next, and so on. Should I consider this? Thank you.

Hi Bethany,

The rates are attractive on this loan type and as a result you find the lower payment. But as you are also aware that your principal loan amount will go up with time as you pay these low rates. The deferred interest is added back.

You have already seen from the calculations of your lender how your payment will go up with time and in 30 years there will be a considerable increase I suppose.

Now my question is do you have any problems with the loan payments if you are not choosing a COSI loan? Do you wish to save money for some other purpose at present or expect a steep hike in your income in future?

Unless there are some conditions like that I don’t think that it will be wise to choose a COSI loan.

James

Some of the areas where COSI can be helpful and you can consider it are -

• You wish to have minimum payments for your house so that you can afford other payments.
  
• You want to save to make some other purchases.
  
• You want to invest the difference somewhere else.
  
• You want to control the amount of tax-deductible interest paid each month.
  
• You want some bigger house now.
  
• You have a fluctuating income and you expect a hike in future.
  

Bethany, if none of the above conditions meets your situation then stay out of the COSI loan else you may consider it.

I have just applied for a home equity line of credit and the bank utilizes the COSI Index. Has this index ever had a history of going down? I haven't seen this question asked, perhaps because it is a pipedream!!

Hi Marie,

Welcome to MortgageFit Forums.

The COSI is computed on the last day of each month and it gets announced on or just before the last business day prior to the fifteenth day of the following calendar month.

Yes you will find that the index has also gone down sometimes. In fact, historically the COSI has moved up and down with time but much less rapidly than indexes based on the PRIME Rate, the Federal Reserve discount rate, or Treasury bill rates.

The following monthly changes in the COSI index can give you an idea –


Feel free to ask if you have more queries or doubts.

Thanks,
Samantha

My financial advice has suggested the COSI loan for our new home purchase. Does all COSI loan monthly increase are cap at 7.5%? In addition, please explain what “lifetime interest rate cap of about 12%” is?

Thank You

Hi,

A lifetime interest cap limits the maximum interest the lender can charge during the loan term.

And I have heard that COSI has never reached the cap of 12 percent in its 40 years of existence.

Thanks

Hi,

The 7.5 percent cap means that this is the maximum percentage change that can get to your payments per year.

robbins

Hi,

Usually COSI loans have minimum payment change caps of 7.5%. But this can vary with the lender who is providing the loan.

COSI loans usually have lifetime interest rate cap of 12% which means that the interest rate cannot increase beyond 12% over the life of the loan.

Thanks,

Caron.

i currently have a mortgage for 30yr fixed with 7.250 int my payments are very high, i need refinance or i will be heading for foreclosure. a lender is offering a 30yr type cosi loan int 1.95, i am very confused is this a good choice. thanks