Question:

What is the most used Option ARM index?

Answer:

The most popular Option ARM index is MTA (Monthly Treasury Average), also known as the 12-Month Moving Average Treasury index (MAT).

Another popular Option ARM index to use is the 11th District Cost of Funds Index (COFI).

Both MTA and COFI are ARM indexes that allow for negative amortization and this is the reason Option ARM mortgage loans are usually tied to one of them. However, other Option ARM indexes are COSI and LIBOR, although they are more rarely used.

MTA and COFI are ARM indexes that change a lot more slowly than other ARM indexes. MTA is a 12-month average of the 1-Year CMT, and COFI is a 2-month lagging index. They smooth out a lot of the changes associated with ARM indexes. COFI and MTA are the preferred Option ARM index for 1- or 3-month adjusting ARMs and are the top choice when market rates are going up.

COSI and LIBOR display a lot more volatility and are great when market rates are going down, since your mortgage payment will go down following the rates.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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