What are the annual loan payments and what is the effective borrowing cost?  If a lender offers a 15-year, $3,250,000 ARM with a starting rate of 6%. There is no prepayment penalty, a 1% periodic interest rate cap, and you plan to sell the property in 5 years.  Interest rates are forecasted to be 5% in year 2, 6% in year 3, 8% in year 4, and 8.5% in year 5.