A Cost of Funds Index or< a href="cofi">cofi is a regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating variable rate loans. The interest rate on an adjustable rate mortgage, for example, is often linked to a regional< a href="cofi">cofi specified in the particular loan documents.< a href="cofi">cofi s, in turn, are usually calculated by a self-regulatory agency like Federal Home Loan Banks. In California, for example, many home mortgage loans are indexed to the Federal Home Loan Bank of San Francisco. Interest rates on< a href="cofi">cofi loans and mortgages tend to fluctuate more slowly than variable-rate loans linked to other indexes.

The< a href="cofi">cofi Cost of Funds Index is a popular index for Pay Option ARM negative amortization home loans.

The Cost of Funds Index is generally a very stable index as well as a lagging indicator of interest rate movements. The cost of funds index is a weighted average of the interest rates paid out for checking, savings, and other depository accounts by a bank. Since banks do not quickly raise the deposit interst rates offered, the< a href="cofi">cofi tends to be a stable index.

The< a href="cofi">cofi has historically been one of the lowest index measures in the country.

COFI is a index, Cost of Funds Index. Many lenders use this source of funds to lend on adjustable loans. Historically it has been a favorable index and is one of the most popular among lenders and borrowers alike for adjustable loans. As with any adjustable loan, the index is a key factor as is the margin, since the margin is what the rate will be set at for the first adjustment. Look for loans with low margins.