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what index (MTA, COSI, COFI, etc.) to use for pick a pay
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   Types of Loan Programs-> Pay Option ARM, Pick-a-Payment, Cash Flow LoanMessage format
Posted 5/17/2006 2:01 PM (#1069)
Subject: what index (MTA, COSI, COFI, etc.) to use for pick a pay
I am starting up a new business soon so I am trying to get my monthly expenses down for the the next couple of years. I have been researching the pick a pay loans and it seems like the loan that I have been looking for. I am in the northern virginia area so my equity growth has been great but has been slowing down. I would like to take out a $380,000 loan which is about 88% LTV.
I am now in the research stage in finding which index would work best for my needs. I heard the the COSI is the most stable out of all of them but the margin seems to be higher. I also heard that the MTA is not a stable index and that the MTA index has a very good potential to get really high as many investors are not wanting to put there money into the U.S. Treasury and are looking else where to invest. And I don't really know much about the COFI. Also how I see it, the start rate of the COSI would be 2.1 (due to the high LTV)and the MTA would be 1.25.
Should I be real worried about the neg. am. if I am planning on utilizing this loan only for a maximum of 5 years.
Also would a 40 year loan be better for my purposes as oppose to the 30 year?

Any help/ insight/ guidance would be most appreciated.
Posted 6/1/2006 1:10 AM (#1105 - in reply to #1069)
Subject: RE: what index (MTA, COSI, COFI, etc.) to use for pick a pay
Nice question.... Because of the potential for neg am built in to the pay option arm, its usually better to go with a cost driven index such as COSI, COFI or CODI so that you can take advatage of the lower payments while minimizing the deferred interest you accrue. Those three indicies are also mainly based on bank rates, which historically move less frequently and adjust less per month than market driven indices such as MTA, LIBOR or the Treasury.

I'm a manager for a mortgage department of a large bank, let me know if I can help further.

Matt Trombley
Home Loan Experts
A Division of World Savings
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