Posted by jya-ning on October 03, 2003 at 15:53:22:
What you think the outlook of the mortgage interest rate in the next few years will be? You need to make an assumption here in order to compare 1month ARM with 12 month rolling ave. Against 5 yr ARM.
Check your cost to do the re-finance. I believe it is close to 1 pt.
Spread it to 5 year. You probably can see if 5 year arm is better than fix if the rate is not changed. But assume the rate is close to the lowest point, fix seems pretty attractive.
You may have negative cash flow in fix though. 5year arm can allow you to have positive cash flow while waiting the appreciation of your property or inceasing in rent that can eventually cover the house payment, also, if you can comeout with some outside money from time to time, you can incease the equity in 5 year time, thus when you re-finace, you will have less payment even when the rate goes up.