My wife and I will be building a house this fall, which means we will not be locking in a rate until near the end of the year. Here are all of the different options we have to pick from. With interest rates rising quickly, I am trying to decide if it makes sense to try to lock something in now or let it ride until the end of the year. Also we plan on staying in this house for a long time.

Option 1: Start construction loan within next few months at 2.625%, then roll into a 30 year mortgage at end of year. Current rate is about 4.65%

Option 2: Start construction loan within next few months at 2.625%, then roll into a 15 year mortgage at end of year. Current rate is about 4.15%.

I did the math on this one and the mortgage payment would be about $600-700 more per month. If I invested that month over the 15 years instead of paying towards the mortgage I would get about $200,000. I also calculated how much interest I would save on a 15 year loan and it is about $190,000. Therefore, somewhat of a wash.

Option 3: Start a 7 year ARM right now at 4.375%. This would obviously lock in this rate for 7 years, but who knows where rates will be in 7 years...

Option 4: Start a 10 year ARM right now at 4.625%. This would obviously lock in this rate for 10 years, but who knows where rates will be in 10 years...

The mortgage officer I have been talking told me most people refinance within 7-10 years anyway so the arm might be worth it to get the lower rate now. But we do plan on being in this house for a long time. I feel like if we wait until the end of the year to lock in a 30 year loan, the rates are going to be over 5%.

Other positives of the arms is that I can lock in those rates now and at the end of the year, I still can change to a 15 or 30 year loan if we want. But of course the big negative is having to deal with rates in 7 or 10 years. But we can also refinance anytime within the 7-10 year period.

What would you do?