Stated Interest Only Loans

Inerest only loans are getting some heat in the market place today . . . they're termed exotic, and indeed, some of them are.

The point of an interest only loan is to lower your payment to Just Interest - hence the name, and for whatever interest only period you choose, you pay nothing on the balance of your mortgage.

I find the 30 year, ten year interest only loan a tool helpful to investors, the cash flow for the first ten years is enhanced, and in ten years the probability is that you'll have sold it or the appreciation will allow you to refinance.

Appreciation is happening much these days (September 2007) so before choosing this loan, you really should look at your plans for this property.

I don't find this a viable product for homeowners, and don't recommend it, however, if you want it and you qualify for it, I consider you adult enough to make your own mortgage product choices.

LIBOR: London Inter-Bank Offered Rate

LIBOR stands for "London Inter-Bank Offered Rate." It is based on rates that contributor banks in London offer each other for inter-bank deposits. From a bank's perspective, deposits are simply funds that are loaned to them. So in effect, a LIBOR is a rate at which a fellow London bank can borrow money from other banks. Rate calculations are complex as they incorporate variables such as time, maturity and currency rates. There are hundreds of LIBOR rates reported each month in numerous currencies. We only report the 1 Year LIBOR as published monthly by Fannie Mae. This is a LIBOR for a one year deposit in U.S. Dollars during a given month.

COSI : Cost of Savings Index

Golden West Financial Corporation is the parent company of World Savings. World Savings borrows money from consumers in the form of deposits and then lends the money out as home mortgages. The interest rates in effect on these deposits are the basis for the Cost of Savings Index (COSI). The COSI is not based on actual interest paid on deposit accounts, but rather on a weighted annualized rate of all interest rates in effect on deposit accounts as of the last day of each month.

WHEN IS THE INDEX ANNOUNCED? Golden West computes the COSI as of the last day of each calendar month and announces it on or near the last business day prior to the fifteenth day of the following calendar month. For example, Golden West announces the February COSI on or near the last business day prior to the fifteenth of March. It is in effect until the announcement of the March COSI in April.

HOW IS COSI CALCULATED? The monthly index is a ratio of monthly interest costs to total funds, expressed as a percentage. Annualized interest, the numerator, is calculated by multiplying the deposit balances at the end of each month by the weighted average interest rate of each account type that was effective on the last day of the month. Total deposits, the denominator, is the total balance of deposits on the last day of the month. The quotient resulting from dividing the annual-iz-ed interest by total deposits, multiplied by 100 and expressed, as a percentage, is the Weighted Average Cost of Savings (COSI) COSI Calculation.

COFI: 11th District Cost of Funds Index

Published by The Federal Home Loan Bank of San Francisco, COFI is the acronym for the 11th District Monthly Weighted Average Cost of Funds Index. The COFI is not an interest rate. It reflects the interest expenses reported for a given month by the COFI Reporting Members, as described below. The interest expenses are incurred from the COFI Reporting Members' various sources of funds. Deposits -- including checking and savings accounts, certificates of deposit, money market deposit accounts, transaction accounts, and passbook accounts (collectively known as "Deposit Accounts") -- are the primary source of funds for most savings institutions. Other sources of funds include loans obtained through the credit program of the Bank (known as "advances") and from other sources. more info...

MTA: 12-Month Treasury Average Index.

fi·nan·cier

Pronunciation: "fi-n&n-'sir;
f&-"nan-, "fI-
Function: noun 1 : one who specializes in raising and expending public moneys;
2 : one who deals with finance and investment on a large scale.

Member, Georgia Association of Mortgage Brokers, Cobb Chamber of Commerce, National Association of Professional Mortgage Women & National Association of Mortgage Brokers

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