I'm not very knowledgeable about FI products/mortgages and was hoping someone with more experience could verify my thinking here. What I want to do is compare a current day fixed versus ARM mortgage. For a fair comparison I want to keep <b> fixed payments on <u>both </u> loans the same </B> and see which one is paid off quicker, essentially finding the one that you end up paying less interest on. For the fixed rate, it is simple, just do the calculations and sum up the total interest paid each month...done. But for ARM, I have made the following assumptions: - Most ARM rates are prime rate plus some "margin" - Prime rate is very correlated to libor - Using eurodollar futures the expected future (expectations hypothesis) of libor rates can be extracted - Using these predicted expected rates figure out the interest paid each month for the ARM I'm expecting both fixed and ARM total interest paid to be close to each other, but that's what I want to investigate. Any flaws in my thinking/assumptions here? I'm doing this basically for myself and then I'll probably post up the results on my blog.