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Company Loan Type APR Est. Pmt.

ARM

Posted on: 27th Jul, 2009 11:13 am
What is the diiference between One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR)?

is it necessary to know my ARM is linked to which index? if yes, can borrow ask for specific index?
Hi kentmark!

Welcome to forums!

1 Year Treasury-bill ARM is a rate fixed for 1 year. The rate adjusts from the 2nd year based on the 1-year treasury index which is added to a pre-determined margin to get the new annual rate. You can ask your lender what the margin, life cap and periodic payment caps of your Adjustable Rate Mortgage (ARM) will be. You should note that the loan is fully amortized and will be payable in 30 years if the normal payment schedule is followed.

The 11th District Cost of Funds Index (COFI) is said to be the weighted average of the cost of borrowings to member banking institutions of the Federal Home Loan Bank of San Francisco (the 11th District). The rate lags the market interest rate adjustments and is relatively stable because institutions borrow money for varying terms. They do not pay market rates for all of their funds.

LIBOR or the London Interbank Offered Rate is the most active interest rate market in the world. It is used in determining the interest rate futures, swaps and Eurodollars. Due to London's importance as a global financial center, LIBOR applies not only to the Pound Sterling, but also to Swiss Franc, US Dollar, Canadian Dollar and Japanese Yen.

Feel free to ask if you've further queries.

Sussane
Posted on: 27th Jul, 2009 11:46 pm
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