Salt or Sugar?

I have had some discussions this past week about the challenges of financing and the options that are available right now. I'm hearing "take the 5/1 ARM because it is a lower rate and you can refinance in five years".

Sounds pretty good to me or is it?

"Take the 5/1 ARM because the rate is lower then the 30 year fixed and besides, you'll be out of the property before then." Or will you?

So which is it? SALT or SUGAR?

See, I'm thinking and thinking till I can drive myself crazy with the decision but then I'm looking at how Lee Iococca, that saved Chrysler back in the 1980's when their stock went down to $5 and neither my brother nor I would take a gamble with Chrysler because neither of us could afford to loose more money, is now going to loose his pension and forbid that he has to turn in his car that he was promised until "death do us part" or purchase it under the new Chrysler ownership.

What does this have to do with anything? Well, I do not think that most of us have still learned our life's lessons and I bet that some will grab that 5/1 ARM because it is such a deal like the negative ARM that was introduced way back or maybe it is a deal.

Then I'm looking at the fact that one in eight properties is in pre-foreclosure right now and this is just the beginning. So, I'm thinking with all the default on mortgages due to whatever reason and there are alot of them and alot of sad ones on top of it, I'm looking at values will still decline and if someone put 20% down on a property and they loose part or all of that equity and are flat lining then when they refinance their home down the road for a similar rate that would be reflected in today's 30 year fixed but now will the bank require the homeowner to pay PMI because the equity is less then 20% and so now PMI rates are anticipated to go up even more and twhile I may be driving you crazy by reading this .... I'm then thinking that the homeowner will and could possibly, actually be paying more down the road becaue PMI may be added to a tidy sum of let's say $225 additional a month and all to save how much right now?