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A cost of savings index loan, or COSI, is an adjustable-rate mortgage that sets the interest rate on your mortgage based on changes in that specific index. COSI measures the average interest rate paid to depositors on checking accounts, savings accounts and CDs. Unlike a cost of funds index, or COFI, which is based on what banks pay for loan-able funds, COSI makes it’s decision on what banks pay to depositors. This is because deposit rates are slower to change than that which banks pay to borrow money.

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This index is the weighted average of the rates of interest on the deposit accounts of the federally insured depository institution subsidiaries of Golden West Financial Corporation (GDW). All of the depository institution subsidiaries of Golden West Financial Corporation operate under the name World Savings. World Savings receives money from consumers in the form of deposits. The interest rates on these deposits are the basis for the COSI index. It is not actual interest paid, but the weighted annual average of interest rates in effect on World Savings deposit accounts on the last day of each month.

COSI Explained

The COSI adjusts monthly and has a one-month lag in reports. It is computed on the last day of each calendar month and announced on the last business day prior to the fifteenth day of the following calendar month.

The COSI (Cost of Savings Index) Loan offers you the most flexibility when qualifying for a loan, putting you in control of your finances when you start making payments. You are easily able to manage your money with up to four payment options each month: Minimum Payment, Interest Only, Fully Indexed Payment, or Equity Building.

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One excellent point to remember when considering your loan index is that the Cost of Savings index is considered to be among the most stable ARM indexes in the industry. It is one of the most widely used Option ARM loan indexes.

Many COSI-indexed ARMs often have minimum payment change caps as well as lifetime interest rate caps but no periodic interest rate caps creating the possibility for negative amortization.

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