The 11th District Cost of Funds Index (COFI) is a benchmark interest rate used in the United States to adjust adjustable-rate mortgages (ARMs). It is calculated by the Federal Home Loan Bank of San Francisco (FHLBSF) and reflects the interest expense incurred by savings institutions in the 11th Federal Home Loan Bank District. The 11th District includes Arizona, California, and Nevada. The COFI is based on the weighted average cost of funds for savings institutions in the district and is published on the first business day of each month. It is typically used as a benchmark for adjustable-rate mortgages in the Western United States.
The COFI is typically used as a benchmark for adjustable-rate mortgages in the Western United States. It is used to adjust the interest rate on these mortgages, which means that the rate changes based on the COFI. When the COFI goes up, the interest rate on the mortgage will also go up, and when the COFI goes down, the interest rate on the mortgage will also go down. This can affect the monthly payment on the mortgage, as well as the overall cost of the loan over time.
It is important to note that the COFI is only one of several indices used to adjust adjustable-rate mortgages, and it is not used in all parts of the country. Other common indices include the London Interbank Offered Rate (LIBOR) and the Treasury index. The index used will depend on the specific terms of the mortgage and the lender.
In general, adjustable-rate mortgages are considered riskier than fixed-rate mortgages because the interest rate and monthly payments can change over time. It is important for borrowers to understand the terms of the loan and how the interest rate is adjusted before they decide to take out an adjustable-rate mortgage.