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Bill -

Here are some things to keep in mind. Your tolerance for risk will determine the final course.

Interest rates have been historically low for a long time. What would happen if we saw high rates for 5-7 years? It's a long shot, but the worst-case should be considered.

Regardless of the path you take, refinancing is always an option (assuming your personal financial situation remains stable). There are many lenders who offer true "no cost" refinancing at slightly higher rates. The break even point for these programs is immediately (the type of investment I like).

For long-term purchases, ARMs are not good unless you are rich and can absorb the risk.

For my purchases, I always go with 30-year fixed and the lowest CC, no point loan I can find. The future in uncertain, but the CC and fixed rate is guaranteed. I also refinance liberally. It's a hassle, but so is earning the money that I just saved. The banks are offering you a long-term fixed rate, but let you pay it off if rates go in your favor....pretty good deal if you ask me.
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