An interest only mortgage might very well be right for you but you need to know the upside and downside.

There are various interest only adjustable rate mortgages (ARMs) available. Some carry an initial fixed rate for three or five years so you're protected for a while against rising rates. Note that the 3.50 percent LIBOR in my previous column is a monthly ARM. An interest only ARM that's fixed for five years will carry a much higher rates that 3.50 percent.

If your current six percent loan carried an interest only payment feature, the payment would be $1,500 per month - only $299 less than a fully amortized payment. So if you're looking for significant cash relief, a low interest rate is necessary.

What I'm getting at is this: A lower interest rate on an ARM means higher risk to you. The rate on the LIBOR ARM that I like so much can change every month so anyone that takes this loan is completely subject to interest rate volatility. But it's a cheap rate.

Now let's talk about your $924 monthly decrease in mortgage payment. Indeed, if you are serious about establishing a decent college fund, a $924 deposited monthly and invested wisely is surely to grow over the long haul. But remember that it won't be $924 forever. The LIBOR will go up eventually, and when it does, that $924 spread will shrink.

As for the stock market, who knows? Deciding when to invest in stocks is a personal decision. The only rule that I know is to buy low and sell high. The problem is that nobody knows when the "low" and "high" are.

Since your loan is subject to market rates sometime in the next five years, I certainly wouldn't tell you that a 3.50 percent LIBOR isn't right for you. Since the LIBOR is currently so low, it could take years before the rate reaches back up to six percent. And in the meantime, you're building a decent college fund. There are some who would advise against an interest only mortgage because there's no principal curtailment. That's a good point and it's important to pay off a mortgage. But I see too often folks taking out a 30 year or 15 year mortgage who anxiously pay down their loan, only to jack up their mortgage debt a few years later by taking out a home equity line. Seems to me like digging a hole and filling it back up.

If your goal is to keep a mortgage payment low and do something wise with the cash flow relief, a 3.50 percent ARM is a good alternative.