The COFI or Cost Of Funds Index loan is an adjustable rate mortgage. Because it is the slowest moving Index either in the US or Europe, and because it has a 7.5% yearly Payment Cap, a low fixed Margin, with the ability to make 5 monthly payment choices:

1.Minimum payments for some of the lowest monthly payments offered in the US.
2.Interest-only payments.
3.Fully Indexed (Index + Margin) payments.
4.15 yr. payments based upon the monthly fully-indexed Rate.
5.Pay any amount over the "Minimum" pmt.

It is the safest of all ARM programs offered today.

The reward of obtaining these Adjustable Rate Mortgages is that you have the option to start off with lower mortgage payments. Thus, with the lower payments, it could help you to stay out of future credit card debt, or get you out of existing credit card, or automobile debt. If you have no debt, the lower payments will help you to quickly build up a savings portfolio for your children's college or your family's future retirement.

The best way to get a visual of the potential "increased" cash-flow of the COFI, COSI and CODI program vs. a fixed rate, is the difference between getting a "lower interest rate" vs. obtaining a "lower payment." I.e., with the COFI " option ARM, you'd have at least 4 different ways to make a monthly pmt. With the fixed, you'd only have 2. Hence, with lower payments you should be able to leverage your future house payments in a more beneficial way.

The risk of obtaining these ARMs, are the possibility that your payments and interest rate could move higher than the fixed rate you possibly could have received at the time you went to settlement. But remember, when the fixed rates start to move back down, the COFI, COSI and CODI will also start to slowly inch back down. Keep in mind, that the "over-all" average of the index is the most important aspect of any ARM, that along with its Margin. Hence, with the COFI/COSI ARM, you won't ever need to refinance again.

* Subject to change anytime until rate is locked