Cash-out Refinance with an ARM vs Fixed-rate Loan

[Joseph Mallon]

Hello Bigger Pockets community,

I am in the process (paperwork with my lender) for doing a cash-out refinance of an investment property. I plan on taking cash-out of 75% LTV (Loan to Value). I've been quoted 2.875 for a 3-1 ARM, 3% for a 5-1 ARM, 3.125% for a 7-1 ARM, 3.25% for a 10-1 ARM. In addition, I've been quoted 3.875 % for a 30 year-fixed. About $2800 in closing costs for any of the loans. Doing the numbers, I save about 19,000 over 10 years by doing the 10 year ARM as opposed to a 30 year fixed cash-out refinance and I also pay more of the principle down with the lower interest rate. I save even more with a shorter term ARM on the cost of the money that I take out of the cash-out refi for other investment opportunities.

The more I think about this I am leaning toward a shorter term ARM then refinancing again at a later time. Am I missing something? I appreciate the communities thoughts?

Best,

Joe