Positive cash flow residential rental mortgage - pay off or refi?

[Michael Gibek]

I’m trying to see if I can optimize our financial situation with respect to our rental property that has been cash flow positive since put into service back in 2014. Any recommendations or suggestions are welcome.

We financed the purchase with a 5-year ARM mortgage that is now in its 7th year with an annual interest rate of 5% that adjusts every August 1st based on the 1 year libor plus 2.25% margin. If it was today, the interest rate would adjust up to 5.25%. I'm mulling over several options, including refinancing or paying of the mortgage, but neither option seems to move to needle much. My opportunity cost analysis (available at https://imgur.com/a/6kOLoFl), compares: (a) paying off the $115k balance on the mortgage versus (b) keeping the current mortgage (or refi at 5%) and throwing the $115k into a T-bill ladder or 30-year T-bond. Results show that paying off the mortgage yields about 1.65% or 1.21% more compared to the risk-free rate of return. That's about $1895 or $1397 in annual difference, which doesn't seem very significant.

Are there any alternative financing options out there that would significantly reduce the interest rate cost? Perhaps, in exchange for pledging the balance of the mortgage in liquid assets such as a T-bill ladder? Or cross-collateralize our principal residence (which has over $115k in equity)?