COST OF SAVINGS INDEX (COSI) MORTGAGE

The Minimum payment is the least amount that you are allowed to pay and still remain in good standing with the mortgage.

The Minimum payment, for the first year of the mortgage, is calculated (usually depending on the loan to value and occupancy) using a 1.95% "Starting Rate." But your actual Principal & Interest rate or fully index rate (To calculate Index + Margin) is the actual mortgage rate (on average is 4.87% to 5.2%) If you choose to make the minimum payment of 1.95%, you will not be paying the all of the interest. Therefore, you would begin deferring principal and interest (negative amortization) each time you make the minimum payment. The deferred interest is very little, especially when considering the appreciation in residential homes.

The minum payment rate can be reduced to 1.50% if the mid credit score is 650or higher. The loan cannot have concurrent finnancing that takes the Combined Loan-to-Value ratio over 80%. For Loan-to-Values below 70%, there will not be a credit score requirement.

By making the minimum payment only, you will not be paying the full Principal and Interest rate, it's just the "minimum" that the Lender requires you to pay, i.e. no Principal, and sometimes in the early years of your loan, no Interest is paid. Later on, the Minimum payment will "catch-up" to the Scheduled payment, or the full P.I. payment, to still pay the loan off in 30 years. The Minimum payment will be increased (annually) by the 7.5% payment cap until it catches up to the Scheduled payments. With the bi-weekly payment program, the Minimum payment usually catches up to the Scheduled payment around year 6 or 7; but with monthly pmts, they usually catch up to the Scheduled pmts. around yrs. 8 or 9.

The Minimum payment is one of five payment options, as you can always pay the Scheduled payment (full P.I.), or you can make an Interest Only payment which would carry no negative amortization, a 15 year payment, or you can add any amount over the Minimum payment every month. There will be a time (later in the loan) when the Minimum payment will be a full Principal and Interest payment or "Scheduled payment." This depends upon your COFI, CODI or COSI programs "Starting Rate", the "Margin", and upon the movement of the Index. The Scheduled payment is re-calculated every 14 days via the Bi-weekly program, or every 30 days if you just want to make monthly pmts. If you make the full P.I. payment (Scheduled payment) you will always have a decreasing loan balance even if the Index increases; and you will never have deferred interest or negative amortization.

The Minimum payments are guaranteed for the first five years regardless of the movement of the Index. The Minimum payment is one of five payment options given to you on a monthly statement.
Think of the Minimum payment as you would the minimum payment on a credit card. You may have a large balance, or a small balance, but every month your credit card Lender will give you a choice of how you can pay it off. You can pay all the principal and interest (P.I.) due that month, or pay the balance off completely, or just pay the minimum amount due. Another way to think of the Minimum payment option is to realize that it works like a 2nd mtg., but with no extra fees or higher interest rates. People often say that they are "scared" of the Minimum payment option because it might make their mtg. balance go up.

Since the COFI/COSI/CODI loan is never sold, you are also given these choices on a monthly basis. If you elect to pay just the Minimum payment, your loan will still be paid off in 23 years with the Bi-weekly program, 0r 30 years with the monthly program, because the Lender will take that Minimum payment that you've been paying all year, and increase it by a factor of 7.5% for year 2 and so on, until the Minimum payment catches up to the full P.I. payment or then Scheduled payment. This 7.5% annual increase of the Minimum payment will keep going up until the Minimum payment reaches the "then P.I. payment or the Scheduled payment required to pay the loan off in 23 years via the COFI/COSI/CODI Bi-weekly program, or 30 years if you are making monthly pmts.
If you elect to make only the Minimum payments, you are essentially making smaller payments in the early years of your mortgage, and higher payments in the later years. If you do not want your payments to go higher, just make the full Principal and Interest payment.

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