Many in the investment community would argue that the old tried and true strategy of buying and holding a stock is no longer a viable investment plan. With computer trading, and hedge fund managers manipulating stocks, you can no longer rely on a good stock acting the way it should. So if we consider a 30 year fixed rate mortgage the equivelant of a long term investment, can the same be said about which mortgage program you should choose? Interest rates move up and down with the economy, and we know that there are always economic cycles. Therefore, interest rates are also cyclicle, meaning there are times where they're high, and times when they're low. Add to this the fact that most people either don't live in their homes for more than 10 years at best, or, even if they do, they're likely to refinance to tap into their equity for major expenses.

Considering these factors, wouldn't it make more sense to consider an adjustable rate mortgage that is fixed for the first 5-10 years of the loan? Rates on adjustable mortgages are at historical lows, and the spread between them and fixed rate mortgages are also much wider than the norm. You can lock-in a 5/1 ARM today at 3.25%, a 7/1 arm at 3.50%, or ten years at 3.875%. This compares to a 30 year fixed rate mortgage of 4.375%. Now I understand that fixed rates are also at historical lows, and making the decision to pass up on a 4.375% 30 year rate shouldn't be taken lightly, but if you're purchasing your first home, and know that you'll outgrow it within the next 7-10 years, or your nearing retirement and plan to sell your home, doesn't it make sense to at least consider an ARM?