Posted on: 22nd Apr, 2006 01:27 pm
we have had the same mortgage for 5 1/2 years at 6.18 , we recently adopted a baby and really ate into our equity line of credit.
we are looking to refinance both into one payment and take out more equity for a second child. i am being told that if we pay our current paynent on the cosi for the first year we can get ahead and stay clear of any neg-amoritization. on the other hand we could do a fixed rate , though the monthly payments would be about $400 higher.
truthfully, the cosi is tempting but we are a bit scared of those max cap rates. the way cosi is pitched - it makes one curious why more people would not choose this option - of course it also makes one think if sounds too good to be true.... any input would be appreciated, we do not know which way to go.
thanks - john
we are looking to refinance both into one payment and take out more equity for a second child. i am being told that if we pay our current paynent on the cosi for the first year we can get ahead and stay clear of any neg-amoritization. on the other hand we could do a fixed rate , though the monthly payments would be about $400 higher.
truthfully, the cosi is tempting but we are a bit scared of those max cap rates. the way cosi is pitched - it makes one curious why more people would not choose this option - of course it also makes one think if sounds too good to be true.... any input would be appreciated, we do not know which way to go.
thanks - john
Hi,
If you ask me, I"ll say you go for the fixed rate. The monthly payments are higher now, but atleast your payments won't change after a regular interval.
For more details on COSI, please click here.
Thanks,
Jerry.
If you ask me, I"ll say you go for the fixed rate. The monthly payments are higher now, but atleast your payments won't change after a regular interval.
For more details on COSI, please click here.
Thanks,
Jerry.
Hi,
The COSI index does not fluctuate much, it is one of the stable indexes in the industry. But there are no periodic rate caps, so you may have to go through negative amortization.
It all depends on you; if you are comfortable with the way you have been paying for your COSI loan, then you may keep it. But considering that you will be bringing up two children and you need to keep aside sufficient cash, it's better to go for fixed rate at least after thinking about the future.
So, just give it a second thought as to whether you can manage your expenses with a COSI because you never know what can be the ARM rates in future. For a fixed rate mortgage, you atleast know the rate and can plan your budget based on your mortgage payments.
Thanks,
Caron.
The COSI index does not fluctuate much, it is one of the stable indexes in the industry. But there are no periodic rate caps, so you may have to go through negative amortization.
It all depends on you; if you are comfortable with the way you have been paying for your COSI loan, then you may keep it. But considering that you will be bringing up two children and you need to keep aside sufficient cash, it's better to go for fixed rate at least after thinking about the future.
So, just give it a second thought as to whether you can manage your expenses with a COSI because you never know what can be the ARM rates in future. For a fixed rate mortgage, you atleast know the rate and can plan your budget based on your mortgage payments.
Thanks,
Caron.
J,
A Cost Of Savings Index (COSI) loan is an Adjustable-Rate Mortgage (ARM) that sets the fully indexed mortgage rate based on changes of the COSI index + a margin.
The COSI index measures the average interest rate paid to depositors on checking accounts, savings accounts and CDs. It's not as volatile as other indices used in pricing Adjustable-Rate Mortgages, so it should lag in interest rate movements compared to other indices. However, the COSI is also not as popular or easy to document how it is calculated. Before signing up for a COSI-indexed mortgage, your lender should be able to provide you with historical data, information about how the rate is calculated, and a way to track changes in the rate.
I just completed a similar comparison between available ARM's and Fixed rate mortgage options for a customer of mine seeking the lowest possible payments for at least the first 24 months of the mortgage. Choices included; Adjustable Rate Mortgages, Fixed Rate Mortgages, Monthly Payment Option ARM’s, hybrid mortgages that allowed Interest Only and 'Minimum' monthly payments - and the newer 40 year Fixed program.
All loan programs that allow for Interest Only or 'minimum' payments have a built-in rate premium that somewhat affect the overall payment savings. Plus, as you mentioned - you are once again putting yourself into a product that will adjust over time with unknown risks of possible negative-amortization and rate increases.
My borrower recommendation was that of a 40 year Fixed program due to the fact that it offered fixed monthly payments that were very similar to an Interest Only program due to it being amortized over a longer period. This lower payment was despite having a rate of interest that was actually higher than the comparables (note: this is but one example why borrowers shouldn't make a mortgage decision based only on a rate of interest).
I would think that the 40 year Fixed mortgage with it's stability of low payments for a long time to come would be appealing ... especially in today's rising index and rate environment. With a 40 year mortgage you can always elect to pay more toward principle based on 30, 20 or even 15 year amortization schedules if you find you can afford the higher payments either on a temporary or permanent basis.
Research the 40 year Fixed versus the other options side-by-side prior to making a final refinance program decision.
Best of Luck!
A Cost Of Savings Index (COSI) loan is an Adjustable-Rate Mortgage (ARM) that sets the fully indexed mortgage rate based on changes of the COSI index + a margin.
The COSI index measures the average interest rate paid to depositors on checking accounts, savings accounts and CDs. It's not as volatile as other indices used in pricing Adjustable-Rate Mortgages, so it should lag in interest rate movements compared to other indices. However, the COSI is also not as popular or easy to document how it is calculated. Before signing up for a COSI-indexed mortgage, your lender should be able to provide you with historical data, information about how the rate is calculated, and a way to track changes in the rate.
I just completed a similar comparison between available ARM's and Fixed rate mortgage options for a customer of mine seeking the lowest possible payments for at least the first 24 months of the mortgage. Choices included; Adjustable Rate Mortgages, Fixed Rate Mortgages, Monthly Payment Option ARM’s, hybrid mortgages that allowed Interest Only and 'Minimum' monthly payments - and the newer 40 year Fixed program.
All loan programs that allow for Interest Only or 'minimum' payments have a built-in rate premium that somewhat affect the overall payment savings. Plus, as you mentioned - you are once again putting yourself into a product that will adjust over time with unknown risks of possible negative-amortization and rate increases.
My borrower recommendation was that of a 40 year Fixed program due to the fact that it offered fixed monthly payments that were very similar to an Interest Only program due to it being amortized over a longer period. This lower payment was despite having a rate of interest that was actually higher than the comparables (note: this is but one example why borrowers shouldn't make a mortgage decision based only on a rate of interest).
I would think that the 40 year Fixed mortgage with it's stability of low payments for a long time to come would be appealing ... especially in today's rising index and rate environment. With a 40 year mortgage you can always elect to pay more toward principle based on 30, 20 or even 15 year amortization schedules if you find you can afford the higher payments either on a temporary or permanent basis.
Research the 40 year Fixed versus the other options side-by-side prior to making a final refinance program decision.
Best of Luck!